PHILADELPHIA-Buoyed by “respectable” job growth in the metro area, the apartment sector is having a very healthy year, says Marcus & Millichap in its Q3 report to investors.
While 3,400 new units will come online in 2013, the vacancy rate is nonetheless declining and rents are rising.
At year's end, M&M projects apartment vacancy will be down 30 basis points to 4.9%, the lowest in six years for the area. During 2012, the vacancy rate had remained static.
Rents were up 1.1 % last year and this year M&M says average rents in the metro area will rise anohter 2.6% by the end of the year. That would bring the average rent to $1,128 per month. With that increase, rents will have climbed 10% since bottoming four years earlier.
New rental stock was added in 10 of the 16 submarkets in the Philadelphia area, the report noted, with the impact greatest in Center City.By the end of the year, 1,429 new rentals will have expanded Center City's apartment stock by 4.6%. Last year, only 1,278 new units were added in the entire metro region.
M&M says investor demand for multifamily properties continues to outstrip the number of properties listed for sale, and deal volume continues to surge. As long-term interest rates creep up, more owners are putting properties on the market, says the company.
It advises owners contemplating a sale in the next year or two that “ the current bidding climate and the relatively modest rise in interest rates improve the probability of executing a transaction.”
Lenders are competing to provide acquisition loans, M&M says in the Q3 report, with leverage reaching as high as 80%. “In many instances, local and regional banks have emerged as more competitive sources than the agencies” for loans,” it says.
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