2018 Will Be a ‘Solid Year’ for Apartment Sales
Investor sentiment has roared back this year, and investment sales activity is up in response to the strong demand.
Investors are responding the healthy market dynamics, and more specifically, zealous renter demand. The average home cost in California is rising to record heights, fueling the rental market, and there continues to be millennials who choose to rent rather than own. “Various factors and market dynamics continue to create strong investor sentiment for multifamily investments, most notably the demand for apartments by renters,” says Shanahan. For many, the cost of buying a home is cost prohibitive. As a result, people who might typically be homebuyers instead are forced to rent.”
In addition to renter demand, job growth has also helped to fuel the rental market and drive rent growth. “Job growth is happening in many parts of the state, like the Bay Area and Silicon Valley, where tech companies continue to grow and hire more talent,” says Shanahan. “In fact, it has been reported that there has been more development in the Bay Area over the last five years than in the previous 30. As job growth takes place in locations such as these, people need housing and as a result, multifamily units are often the preferred choice. As housing demand remains high—which most expect it will—rents and values continue to increase, thereby attracting more investors.”
As a result, investors are in “buy mode,” according to Shanahan. There is a deep pool of capital chasing multifamily deals throughout the state. “We expect multifamily investments to be very strong in California as well as in other key markets across the country through the remainder of the year,” he says. “There is a tremendous amount of capital—some estimate as much as $250 billion—that is looking to be placed. Because of the strong fundamentals in the multifamily market, a good portion of available capital will find its way to apartment buildings. Further, because we have such strong MSAs, San Francisco, San Diego, L.A., Orange County, Sacramento and others. It’s a good time to be a seller.”