The ’10s are the apartment decade. Indeed, multifamily has become the darling of commercial property investors, whose seemingly endless appetite for product has pushed cap rates for Class A properties below 5 percent in many top markets. “Multifamily is the only sector to enter the expansion phase of the cycle so far. Average cap rates for multifamily have also returned to pre–financial crisis levels,” says Gleb Nechayev, senior managing economist for CBRE Econometric Advisors in Boston.
Hungry investors are now turning to secondary markets and value-added plays that offer the potential of increasing value through renovation and repositioning. “I’ve been surprised at how quickly markets that a couple of years ago were in panic have returned to normalcy,” says Joe Greenblatt, CPM, president of Sunrise Management in San Diego. In Phoenix, where Sunrise manages 3,000 apartment units, occupancies are above 90 percent in Class A properties, he says.
Read more...The Age of Multifamily