ORANGE COUNTY, CA-While the apartment-development cycle surged here at the end of 2012 and into 2013, the momentum appears to be slowing, according to a report from Marcus & Millichap.

When apartment conditions began to improve in 2009, well-financed development companies pushed several large complexes through the pipeline, resulting in temporary oversupply in some areas—in particular, Irvine—and the new supply has helped reduce the competitive threat in submarkets further north or east. In addition, Irvine is one of the most popular areas with renders due to the concentration of major employers and proximity to the coast, which should limit the timeline for new assets to stabilize, the report states.

In other parts of Orange County, a recovering tourism industry is supporting operations in Anaheim and adjacent submarkets. Leisure and hospitality employment is 3.2% above the pre-recession peak, and many of these workers have few options other than renting local apartments, according to the report.

Investors in the Orange County buying pool have strategies that run the gamut from value-add plays to long-term hold, the report further states. Some of these buyers will be met with more opportunities than others due to current market conditions. Low cap rates favor cash-heavy, long-term buyers who can buy down assets to generate favorable returns. Overall, average cap rates for stabilized class-B properties are in the mid-5% range and trend lower as investors move toward the water or up the quality scale. Operations are healthy and most financially distressed owners have been afforded the opportunity to refinance, so value-add deals will occur rarely. Other properties that fell into disrepair during the recession have mostly been revamped and deferred maintenance has been addressed, leaving few opportunities for buyers to create higher value quickly.

Buyers willing to purchase mid-tier properties in desirable locations, excluding Irvine, will be able to reposition units to achieve higher rents. However, the report says, with thousands of new apartments in the metro, investors will need do find ideal locations and spend a significant amount of capital to make these midi-tier properties desirable to tenants and other buyers.

As GlobeSt.com reported exclusively earlier this month, the Wolff Co., a multifamily development firm based in Scottsdale, AZ, has purchased a 9-acre parcel of land within the master-planned Platinum Triangle area in Anaheim for $24.2 million from investment partnership KL Anaheim. The firm plans to build 399 apartment units on the site, which is located along the 900 block of Katella Ave. near I-5 and the 57 and 22 freeways.