Part 1 of 4
The multifamily market has several good years left to go—that is the consensus view from investors, industry observers, and agency officials who participated in Capital One's recent industry survey at the RealShare Apartments conference in Los Angeles.
The optimistic picture emerging from the survey has some interesting nuances that could shape the way investors look at the market through 2018. In our first of four posts, Capital One Multifamily Grace Huebscher, who spoke at the event, weighs in on the hardening of divergent views on the market's future.
The views in the commentary below are the author's own.
Buyers Meet Sellers
Every year, we ask participants at a number of industry conferences whether they plan to be net buyers or sellers in the coming year. For the second year in a row, RealShare Apartments' attendees were more than twice as likely to describe themselves as net sellers rather than buyers. That view is hardly surprising, supported as it is by the tremendous investor interest we've seen in multifamily over the last few years, and it is, of course, a main reason that cap rates are as low as they are.
Much more revealing, we feel, is the decline by eight percentage points, from 43% to 35%, of those who have adopted a neutral stance on the market's future—who believe their buying and selling will essentially cancel each other out. This difference was split evenly between the bulls and bears. In other words, there are more people this year who feel they have clarity on the market's future, but they don't agree on its direction.
We can see this divergence of opinion playing out in the market. One camp of knowledgeable investors are increasing their presence in multifamily. A good example is the Blackstone Group's $5.3 billion purchase of Stuyvesant Town-Peter Cooper Village. Members of this group tend to invest internationally, and they see multifamily as a low-volatility investment with attractive returns compared to other global options.
On the other hand, some companies who have been long-term holders are interested in divesting their holdings in noncore markets. They see high valuations as an inducement for selling because they are not sure how long these prices are going to last. A good example is Equity Residential, which recently sold a 73-property portfolio to Starwood Capital Group for $5.4 billion. Sam Zell's rationale was that his firm was capitalizing on healthy valuations to redirect its focus from suburban markets to downtown urban centers.
Ultimately, these divergent views—on valuations, on different cities, on urban versus suburban markets—are driving the strong multifamily activity we've seen in 2015 and expect to see in 2016.
Stay tuned for more from Capital One on its multifamily market outlook in the coming weeks on GlobeSt.com.
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Natalie Dolce
Natalie Dolce, editor-in-chief of GlobeSt.com and GlobeSt. Real Estate Forum, is responsible for working with editorial staff, freelancers and senior management to help plan the overarching vision that encompasses GlobeSt.com, including short-term and long-term goals for the website, how content integrates through the company’s other product lines and the overall quality of content. Previously she served as national executive editor and editor of the West Coast region for GlobeSt.com and Real Estate Forum, and was responsible for coverage of news and information pertaining to that vital real estate region. Prior to moving out to the Southern California office, she was Northeast bureau chief, covering New York City for GlobeSt.com. Her background includes a stint at InStyle Magazine, and as managing editor with New York Press, an alternative weekly New York City paper. In her career, she has also covered a variety of beats for M magazine, Arthur Frommer's Budget Travel, FashionLedge.com, and Co-Ed magazine. Dolce has also freelanced for a number of publications, including MSNBC.com and Museums New York magazine.
