The appetite to invest in multifamily is gaining some steam thanks to economic conditions becoming more favorable after a year or so of turbulence.
That is according to Kitty Wallace, senior executive vice president at Colliers, who will be a speaker at GlobeSt.’s upcoming multifamily conference, taking place from October 14-15.
Wallace, who mainly focuses on Southern California, said that she has seen some recent demand thanks to the 10-year Treasury dropping below four percent and the Federal Reserve potentially beginning the start of cutting rates following its September meeting.
“We’re seeing institutions now back in the market, looking for good basis plays, which is great,” she told GlobeSt.
“There are the mission-based individuals who are hunting down reasons to purchase, and for the most part, a lot of our clients are selling.”
LOW LA SUPPLY HELPING
She added that most of the activity is prevalent in properties worth under $50 million. With the cost of construction and debt elevated, larger projects have been at a stalemate.
Also, supply has been limited. According to Wallace, LA is short approximately 600,000 housing units right now. But regulations in the city make it tougher for CRE firms to operate. For example, the ULA tax, which was first implemented in April 2023, has caused some issues. The law requires commercial and residential operators who earn more than $5 million in sales to pay a four percent tax. And for anything over $10 million, the number gets boosted to 5.5 percent.
“The ULA tax is going to force some to look outside Los Angeles to Northern California to build in the state.
“The pipeline is very slim. So we’re actually seeing a tremendous amount of individuals also looking to Northern California. It’s an exceptional buying opportunity, and most of those markets including Oakland, have seen a little bit more distress.”
Some markets like Florida and Nashville have oversupply, which has been hindering industry growth. But every region is different and some others like LA have tough regulations. But still, Wallace spoke highly of The Golden State.
In California, Wallace referred to Danville, San Ramon, Pleasanton, Dublin, Palo Alto, and Fremont areas as “good pockets.”
“So some of those pockets have really added some great shopping centers, and job spots that have made a community,” Wallace said.
OTHER AREAS SEEING DEMAND
Outside of California, Wallace points to Dallas, Georgia, Salt Lake City, Arizona, and Las Vegas, as markets that are seeing strong multifamily demand, currently.
“Dallas seems to have lots of legs,” she said.
“You can get from Dallas to anywhere in the United States, [with] a direct three-hour plane.”
OPPORTUNITIES
Meanwhile, as a broker, Wallace noted that things have been for the most part slow from the business standpoint for its clients but not necessarily her team. But that hasn’t shied them away from opportunities.
“We’ve been buried and busy trying to help execute for our clients,” Wallace stated.
“We have clients who have to sell for certain reasons, whether their debt is due whether they want to partnership the solution, and whether they just want out of the state of California.”
Wallace added that Colliers has been hiring and looking to expand its brokerage team.
But the opportunities are there in Northern and Southern California, according to Wallace. They are “really great deals for people to [invest] some capital,” she said.