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Private money pushing multifamily investment market to a record year

By Holly Dutton

Multifamily demand and investor appetite is rising, and is on track for a record-breaking year, according to two new multifamily market reports.

CBRE’s U.S. Multifamily MarketView report predicts that multifamily investment in the U.S. is on track to surpass the previous high of $105 billion set in 2007.

BRIAN McAULIFFE
BRIAN McAULIFFE

“Multifamily continues to lead commercial real estate through the recovery and into expansion,” said Brian McAuliffe, senior managing director, CBRE Capital Markets, Multifamily. “Three trends characterize recent investment activity by buyer category. First, private non-institutional buyers’ share of total activity has increased from 50 percent in 2013 to 59 percent so far in 2014.

“Second, foreign capital is playing a larger role, accounting for six percent of this year’s total apartment investment through Q3 2014 — up from five percent in 2013 — and 10 percent of all mid/high-rise investment — up from three percent in 2013.

“Third, REITs are playing a less active role in the investment arena, with market share of acquisitions falling from 20 percent last year to nine percent this year.”

In the 3Q of 2014, multifamily sales volume totaled $27.5 billion, an increase of 28 percent year-over-year.  The total in the first nine months of the year reached $73.1 billion, a 3 percent increase from the same period in 2013.

Marcus and Millichap’s 4Q Apartment Research Market Report for New York attributes strong job growth and high college enrollment for helping to lift the demand for apartments in New York City, with occupancy staying high as supply growth speeds up.

Total employment in the 3Q in all five boroughs was 6.5 percent above the pre-recession high and has continued to climb, helping attract millenials to NYC, said the report.

605 West 42nd Street
605 West 42nd Street

In 2014, developers will complete a total of 12,000 rentals, while multifamily permitting is expected to surpass 24,000 units, pointing to rapid growth in supply in the coming years, compared to last year, when 6,300 units were brought to market. The bulk of those permits will be issued in Brooklyn, a borough that is on track to surpass 8,500 units, while 6,700 permits are expected in Manhattan. Last year, approximately 17,600 units were permitted throughout the borough.

The largest project underway is a 60-story rental building at 605 West 42nd Street, developed by the Moinian Group. The 1,174 unit development also has 10,000 s/f of ground-floor retail space. The project is scheduled to open in the 3Q of 2015.

Vacancy is up as well, with delivery of new rentals expected to outpace demand, vacancy was up 20 basis points to 2.3 percent this year.

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