Huebscher: 'Broad-Brush Demand' for Multifamily

BETHESDA, MD—The on-the-ground experience of Grace Huebscher and her team at Capital One Multifamily Finance thus far in 2015 bears out the predictions of a recent industry survey the company conducted: there will be more net sellers in the apartment sector this year compared to 2014. As Globest.com reported earlier this month, 29% of respondents to the survey said they expect to be net sellers, compared to just 18% who answered a similar survey a year ago. In addition, 47% of survey respondents plan to be net buyers in the current year.  

President of Capital One Multifamily Finance, Huebscher sees demand across the board for multifamily product. She sat down recently with GlobeSt.com to expand on the results of the survey, conducted this past winter at the National Multifamily Housing Council's annual conference for its commercial real estate banking clients and industry professionals.

GlobeSt.com: Based on the results of the Capital One Multifamily survey, it appears that 2015 will be busier than last year.

Grace Huebscher: Exactly. Clearly there are more net buyers than net sellers, but there are more net sellers than there were last year, in absolute numbers. I can tell you that based on the activity we're seeing, this is in fact true. We're seeing a lot more activity compared to this point last year. There was a lot of activity at the end of 2014, and that pace is just continuing in the first part of this year.

GlobeSt.com: So it's a case of the momentum continuing, not a bulge in activity as 2015 wound down.

Huebscher: Yes. I think that people will tell you that there's just a lot more activity overall—definitely on the acquisition front, which is supported by the survey results. There's a lot of data out there, and people are taking differing stances on that data, and that's why there's greater activity.

GlobeSt.com: Drilling down a little into what people are buying, are we seeing more buyers looking at secondary and tertiary markets for higher yields?

Huebscher: Honestly, I think the activity is across the board. You're hearing some more talk about value-add, but there's still a lot of interest in core, and you've got some accelerated refinance activity going on because of the low interest rate environment. So I would tell you that it's across the board. In places like New York City, where you've got low cap rates, and on the West Coast, where you've got compressing cap rates, there's just a lot going on.

GlobeSt.com: Is it a case of a rising tide lifting all boats?

Huebscher: I don't know if I would characterize it that way. There's a lot of equity out there that's interested in multifamily. And there are people who have owned properties for a long time and believe that now may be a good time to capture value. So it's creating broad-brush activity in all of the sectors.

Globest.com: In the core markets especially, we've heard some concerns about pricing on assets. Do you feel that pricing has become more realistic?

Huebscher: Because of the fact that you've got demand for multifamily outstripping supply, lower interest rates and strong fundamentals for multifamily, you're going to continue to see pressure on price. That was the case last year, and I think it's continuing this year.

GlobeSt.com: Do you see any asset classes within multifamily as especially strong?

Huebscher: There continues to be a focus on development. A lot of pension funds are building for core, because that can be a better way to play and participate than buying existing stock. But the broad-brush demand for multifamily that existed last year is the case the year, and maybe more so, because there's more equity.