LAUREL, MD—Millennials, in general, have become very important to multifamily growth. An apartment building in the Washington DC Maryland suburbs just traded at a 5 or so cap rate. Are the two related? Oh heck yes. Millennials like urban living, of that there is no doubt, but they are also behind the high absorption rates seen in many suburbs, including Laurel.
The property in question is the Concord Park at Russett, which just traded for $79.2 million to PRP/AREA.
William Roohan, Michael Muldowney, Brian Margerum, Michael Rudolph and Martha Hastings of CBRE's Multifamily team represented the seller, while David Webb, Jamie Butler and Maxi Thiels of CBRE's Debt & Structured Finance team helped secure a first mortgage of $58.5 million for the transaction.
Concord Park at Russett is a high-end community, which actually is part of the appeal to Millennials, whose finances have improved enough to take on higher rents.
"Millennials are leasing over the top apartments and Concord Park has killer amenities," Roohan tells GlobeSt.com. "Laurel isn't Downtown, but it is in a suburb that is experiencing growth."
That latter point, of course, is of greater interest to the investors then the renters. But the Millennials' migration to the suburbs is also a trend of much importance to the buyers as well.
Cap rates right now for the best properties in the core of the District are 4 to 4.5, Roohan said. "The further you go out from the core it becomes more opportunistic for buyers."
There are two reasons for that: with more open space in the suburbs there is a greater chance that a nearby development could go up creating competition. Also, rent growth is not as certain.
But this increasing flow of young adults to such submarkets as Laurel is apparently confirmation that such investments are safe bets. Also Roohan points out that Millennials are going to start to get married and have families -- indeed many are already starting on this path. Where will they go? They don't seem inclined to buy a house, so another rental but further out is a good bet.
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Erika Morphy
Erika Morphy has been writing about commercial real estate at GlobeSt.com for more than ten years, covering the capital markets, the Mid-Atlantic region and national topics. She's a nerd so favorite examples of the former include accounting standards, Basel III and what Congress is brewing.
