SAN DIEGO—At the recent NMHC Apartment Strategies Outlook Conference, panelists talk about what makes for a more stable community and why larger 3-bedroom units might be the place to investment. In a follow up to that article, Robert Hart, president and CEO of TruAmerica Multifamily, said that what he finds when we are dealing with larger units in the portfolio is that the cost of maintaining them is much higher.
When Daryl Carter, chairman and CEO of Avanath Capital Management LLC, mentioned that he continues to see demand for larger apartments, noting that his firm is trying to buy properties that have a lot of three bedrooms because those don't seem to turn over as much, Hart agreed. But while he agreed that the larger units are higher demand, he said there is more pressure on those units. “More people means more pressure on the unit,” he said. “The key is to have a balanced property and a balanced portfolio.”
Russell Minnick, president and managing director of Bridge Investment Group Partners, said that in terms of unit size, it really depends on the market. “We have some submarkets in Arizona that have very small units.” But what is sometimes difficult, he said, is how to price those units. “It is hard to understand pricing a 800-square-foot unit versus a 1100-square-foot-unit and then we are hitting the ceiling on affordability.”
As for where the panelists are looking this year, Hart said that it is important to really do the heavy research on which markets are growing and why. “The big battle is the overhang. We are looking at growth cities and where the jobs are.”
Minnick is cautiously optimistic for the coming year and is projecting to do the same amount of business in 2017 as they did in 2016, but said they are looking at things in a different way. “It is getting harder to underwrite and I think returns are going to drop.”
Hart added that there is an element of caution as in looking at markets that have been good for a while. “We are starting to look at some secondary markets.”
Carter explained that they have looked in places like Denver and Seattle and noted that it is very hard to buy things in California. “California is very competitive and we always look at the cost per unit because that ultimately determines affordability.”
Several economic factors have resulted in net positives for the multifamily sector and prices in core markets are at an all-time high. But just how long can the market continue on this trajectory? Join us at RealShare Apartments East on Feb. 28 and March 1 for insights on succeeding in the right markets as well as navigating and finding opportunities in the more challenging ones. Learn more.
SAN DIEGO—At the recent NMHC Apartment Strategies Outlook Conference, panelists talk about what makes for a more stable community and why larger 3-bedroom units might be the place to investment. In a follow up to that article, Robert Hart, president and CEO of TruAmerica Multifamily, said that what he finds when we are dealing with larger units in the portfolio is that the cost of maintaining them is much higher.
When Daryl Carter, chairman and CEO of Avanath Capital Management LLC, mentioned that he continues to see demand for larger apartments, noting that his firm is trying to buy properties that have a lot of three bedrooms because those don't seem to turn over as much, Hart agreed. But while he agreed that the larger units are higher demand, he said there is more pressure on those units. “More people means more pressure on the unit,” he said. “The key is to have a balanced property and a balanced portfolio.”
Russell Minnick, president and managing director of Bridge Investment Group Partners, said that in terms of unit size, it really depends on the market. “We have some submarkets in Arizona that have very small units.” But what is sometimes difficult, he said, is how to price those units. “It is hard to understand pricing a 800-square-foot unit versus a 1100-square-foot-unit and then we are hitting the ceiling on affordability.”
As for where the panelists are looking this year, Hart said that it is important to really do the heavy research on which markets are growing and why. “The big battle is the overhang. We are looking at growth cities and where the jobs are.”
Minnick is cautiously optimistic for the coming year and is projecting to do the same amount of business in 2017 as they did in 2016, but said they are looking at things in a different way. “It is getting harder to underwrite and I think returns are going to drop.”
Hart added that there is an element of caution as in looking at markets that have been good for a while. “We are starting to look at some secondary markets.”
Carter explained that they have looked in places like Denver and Seattle and noted that it is very hard to buy things in California. “California is very competitive and we always look at the cost per unit because that ultimately determines affordability.”
Several economic factors have resulted in net positives for the multifamily sector and prices in core markets are at an all-time high. But just how long can the market continue on this trajectory? Join us at RealShare Apartments East on Feb. 28 and March 1 for insights on succeeding in the right markets as well as navigating and finding opportunities in the more challenging ones. Learn more.
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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.
