Commercial real estate remains in vogue with investors despite marginal gains in the overall economic outlook and concerns stemming from the European debt crisis. For these investors, the multi-family market emerged as the clear favorite among the traditional four commercial property types in 2011, a trend that is expected to continue well into 2012. While office, industrial and retail grapple with weak demand, a strong fundamental recovery in rental housing demand has propelled apartments to a broad recovery in occupancy, rental rates and investor pricing.
With more than 3 million foreclosures since 2009, profound shifts in demographic, economic and social patterns have changed the way many Americans, particularly those of the millennial generation, feel about home ownership. This, combined with the entry of the first wave of “echo boomers” graduating from college, has resulted in the addition of an estimated 1.4 million renter households.
Apartment Development Activity
Permit activity increased significantly towards the end of 2011, indicating that as fundamentals recover, more developers are likely to initiate projects. Locals are leading the development push, including Briarcliff Development, Price Brothers and DST:
- Briarcliff is planning a 298-unit, luxury apartment property on ground it recently acquired at the former Tuileries Plaza Shopping Center.
- Price Brothers recently received approval for its 188-unit development at 46 Penn, which features a medium-density concept on the north side of the Country Club Plaza.
- DST recently announced its plans to add 204 apartment units as a neighbor to its successful retail redevelopment at 51st and Main Street.
- Tanner & White Properties is also planning a redevelopment of the Woodside Health Club into Woodside Village, a 330-unit property that recently received TIF and CID approval from the City of Westwood.
- The Village at Mission Farms is expected to complete construction on its 212-unit apartment property on the west side of Mission Road in Leawood, the first “wrap” concept to be constructed in the Kansas City suburbs.
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| The Village At Mission Farms Concept |
Apartment Investment
Apartment sales activity across the country was up by nearly 75% in 2011 as investors of all kinds moved significant funds into the sector. Similar to the rise in demand for gold, grain, farmland and other commodities, multi-family properties are being viewed by some as a way to hedge impending inflation anticipated as a result of the increased money supply pumped into the system by the federal government. Investors are also attracted to attractive financing, recovering fundamentals and less volatility when compared to the equities market.
Strong demand is expected to continue throughout 2012 as fundamentals are anticipated to remain strong and interest rates expected to remain low.
Contributing Author:
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