Experts Divided on Future of Market Strength

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WASHINGTON, DC-A full house of roughly 350 people gathered to hear brokers, investors and lenders discuss the east coast multifamily environment at RealShare Apartments East, produced by ALM's Real Estate Media Group.

"Strong," "robust" and "well capitalized" were among the adjectives tossed about. So, however, were "oversupply" and occasionally, "overheated."

On one hand, "The combination of debt, equity, the fundamentals, the lack of pipeline," said panelist Steve Witten, senior director of Institutional Property Advisors, "translates into great times for multifamily."

At the same time, though, caution was a common thread as well. In particular, in the DC market and surrounding areas, oversupply (especially for 2013 and 2014 and beyond) has become a real concern. "The risk I am most concerned about is supply, particularly here in DC," said Wistar Wood, director of AEW Capital Management. "At first you think, listening to the fundamentals, that it is a great market," Wood said. "Then you poke around and realize how much stuff is coming on line." Much of it is class A and eventually to get the space filled, the class A space will start making concessions which will trickle into the A- and beyond, he said.

Prudential Real Estate Investors is also being selective about the DC area because of the pipeline, principal Jim Walker, said. The company considers the Northeast, New York City, New Jersey and Boston as their top markets. DC, however, is in the second tier -- primarily because of the supply issue.

In short, DC is losing its aura, said David Webb, senior managing director and principal of Cassidy Turley. Other cities, by contrast (even those further away from major metro areas), are becoming more attractive by comparison.

Indeed, the list of submarkets that are seen as cutting edge in terms of investment range widely and can be found up and down the Seaboard. They include Nashville, the Carolinas, Raleigh and points in Florida. "We are seeing a third for yield in tertiary markets," Dean Signom, senior vice president and director with Transwestern said.

Not that DC is off the radar; on the contrary it is still a chief destination for institutional investors, especially foreign money. It is also a coveted market for many domestic investors, although oftentimes these companies find the city too rich for their portfolios. "We would love to buy here if the price was ever right," Lilli Dunn, chief investment officer with Bell Partners, said.