Colleagues:

Click on the link near the bottom of this email for ARA's Second Quarter U.S. Market Update. We have added new apartment markets as well as data from our National Specialty Practice Groups: Affordable, Manufactured, Seniors and Student Housing.

The second quarter is behind us, and though our industry still rumbles through a tunnel, we see some light at the end. However, like most dark tunnels, is it is pretty tough to determine how long it will take to reach that light.

  • Last quarter 23 out of 24 apartment markets had decreasing effective rents. This quarter 15 out of 28 (54%) experienced decreasing rents. While this is hardly good enough news to strike up the brass band, we see this as a definite firming of rents at their bottom in some areas.
  • The same number of markets had increasing cap rates last quarter. This quarter that number decreased by 30% as there is evidence of competitive capital returning, albeit to the smaller (under $30 million) transactions. Larger, institutional sized offerings are seeing fewer bids and hence higher cap rates in some situations.
  • Occupancies are unchanged from last quarter reflecting continued job losses.
We will soon (a relative term!) be entering one of the most prosperous times in our industry's history. With new construction at a post WWII low, and echo boomers itching to get out of their parent's house or away from their roommate's blaring stereo, the demand for rental housing will continue to increase while we await the return of that four letter word; jobs. Acquisitions at substantial discounts to replacement costs are now being closed by buyers when they see an irreplaceable property. They are not waiting for the bottom but are using underwriting expertise to project NOIs which may be below inflation for the next 12 months. In my mind, these buyers will be the winners. And when, not if, inflation returns, the apartment industry has the real estate product to best benefit.

One final note: ARA Finance, our JV with CW Capital, is now fully operational. Call any of our partners or brokers for refinancing or acquisition loans.

Please CLICK HERE to access ARA's Second Quarter U.S. Market update.

My Best,
Gary

p.s. As always, drop me a line with any feedback you have.
 
 
 


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