Despite a slow 2020, the demand for apartment buildings skyrocketed in 2021 with a series of eye-catching sales.
Dean Zander, executive vice president of CBRE Group Inc., said it would
$ 4.2 billion to $ 4.5 billion in multi-family home sales this year, just below 2019’s volume but well above $ 1.4 billion in 2020 sales.
“The interest in apartment buildings is higher than ever before among all the different types of investors,” said Zander. “A lot has to do with rising rents in almost all markets after there were problems with picking up in 20. Since then, people have been back to work and stimulus checks have helped and confidence has been renewed. “
Low interest rates also generate interest among inventors.
Marc Renard, Executive Vice Chairman at Cushman & Wakefield Inc., agreed that investors are now very interested in this type of investment.
“There are two absolutely preferred types of products as we went through the pandemic and hopefully will emerge from it: industrial and apartment buildings,” he said. “Since all of the capital flows primarily into these two asset classes, there is enormous pressure on these products.”
He added that many markets had double-digit rental growth and low vacancy rates.
Middle income conversions
But many of the biggest sales that year weren’t
Market interest rate transactions but middle income conversion sales.
“This year we’re seeing a return to normal from a transactional perspective, but it’s not just trading at market rates,” said Peter Yorck, Managing Director at Jones Lang LaSalle Inc. “We’ve also seen a flurry of middle-income buyers with (shared powers ). So that’s part of the overall pie that brings us back to this transaction normality. “
Take, for example, Waterford Property Co. and the California Statewide Communities Development Authority. As of April, the two Altana Apartments in Glendale with 507 units for $ 300 million, Residences at Westgate Apartments in Pasadena for $ 237 million, Union South Bay in Carson with 357 units for $ 220 million and 777 Place in Bought Pomona for $ 149.4 million.
Other companies have also spent nine-digit amounts on middle-income housing offers.
“The elephant in the room is the workforce, home bond buyers dominate the larger sales,” said Chris Benton, senior managing director at Newmark Group Inc.
These assets are usually held for a long period of time and do not come back on the market a few years later, as is the case with value-added properties. Delay can have a huge impact on an area.
“When one of these deals hits the workforce, you’re taking newer products offline,” Benton said. “Rents will actually go up because essentially everywhere you look … these are no longer real estate in line with the market, so there will be an increase in rents for the other high-end properties in the area.”
Zander said middle-income deals made up about 40% of the 100+ properties sold last year, and he anticipates these deals will make up a large chunk of the market going forward.
‘Safe Bet’
Experts agree that the areas that are most interested right now are suburban markets.
“Investors are very careful about the sub-markets they are looking at,” said Benton.
He added that some markets with a lot of products online are struggling while markets like Culver City and Burbank are doing very well with an influx of new jobs and a shortage of new products.
Collecting rents, he said, was going well in areas like the San Fernando Valley, while there were some problems in densely populated urban areas.
Yorck added that investors are also interested in the suburbs because a lot of people have moved there because they no longer have to commute to an office as often.
He expects apartments to remain a preferred asset class for the next year as well.
“We assume that the speed of sales will increase. … As apartment operations continue to improve and people get back to work with some frequency, it gets better, ”said Yorck.
Urban markets could also generate more interest.
“We will continue to see very strong interest in apartment buildings,” said Renard. “You will see more confidence in real urban apartment buildings as the return to work speeds up.”
And Benton added that the lack of affordable housing would make housing a “safe future” for investors.
Altana Apartments
Buyers: Waterford Property Co. and California Statewide Communities Development Authority
Seller: Brookfield Property Group
Units: 507
Address: 633 N. Central Ave., Glendale
Price: $ 300 million
The Altana Apartments will now be middle income apartments.
Playa Pacifica and the gallery
Buyer: Prime Residential
Seller: Equity Residential
Units: 454
Address: 415 Herondo St. and 414 2nd St., Hermosa Beach
Price: $ 275 million
Playa Pacifica in Hermosa Beach has 285 units.
Residences in Westgate Apartments
Buyers: Waterford Property Co. and California Statewide Communities Development Authority
Seller: Equity Residential
Units: 340
Address: 31 S. DeLacey Ave., Pasadena
Price: $ 237 million
The Residences at Westgate were built in 2015.
Kings Villages Apartments
Buyer: Jonathan Rose Cos.
Seller: Affordable Housing Development Corp.
Units: 313
Address: 1141 N. Fair Oaks Ave., Pasadena
Price: $ 223 million
The Kings Villages Apartments in Pasadena were built in 1971.
Union South Bay
Buyer: Standard Cos. and California Statewide Communities Development Authority
Seller: Wolff Co.
Units: 357
Address: 615 E. Carson St., Carson
Price: $ 220 million
Union South Bay in Carson covers over 5 acres.
Bell Warner Center Buyer: Bell Partners Inc.
Seller: Hannover Co.
Units: 395
Address: 21050 Kittridge Ave., Canoga Park
Price: $ 216 million
Bell Warner Center was previously the Warner Center Hanover.
Boulevard Apartments
Buyer: Acacia Capital Corp.
Seller: Sares-Regis Group
Units: 340
Address: 20600 Ventura Blvd., Woodland Hills
Price: $ 174.5 million
The property offers several bedroom options.
Landing of the Empire
Buyers: Clarion Partners and Cityview
Seller: Nuveen
Units: 276
Address: 1901 N. Buena Vista St., Burbank
Price: $ 161 million
Empire Landing is the only rental property in Burbank with townhouses larger than 1,500 square feet.
777 place
Buyers: Waterford Property Co. and California Statewide Communities Development Authority
Seller: Picerne Residential
Units: 472
Address: 777 E. 3rd St., Pomona
Price: $ 149.4 million
The 777 Place lot was purchased for middle income housing.
Monterey train station
Buyer: Standard Cos. and Faring
Seller: Clear Capital
Units: 349
Address: 120-180 E. Monterey Ave., Pomona
Price: $ 130 million
Monterey Station has 14 floor plans.
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