He Said/She Said December 2014
Generational ownership changes in multifamily will drive small and medium size apartment sales in 2015By Matthew Wisniewski, CCIM
As the baby boomers have begun transitioning into retirement over the past few years, there has been a reluctance to sell commercial real estate holdings, especially apartment buildings. Initially driven by the recessionary pricing contractions that took place in 2008 and 2009, many of this generation dug in their heels and decided to wait out the storm. At the same time, many children of baby boomers don’t have the desire to follow in their parents footsteps and have no desire to continue the legacy by taking over the family properties.
In previous years, low market prices along with a lack of financing options for these transactions kept all but the most motivated of sellers from the market. Many apartment owners did not keep up with rent rate increases in the market which caused them to miss much of the price appreciation that the recent rate growth afforded many buildings. The under market rents are seen as opportunities to new buyers to immediately add value to their purchases by freshening up the properties and moving rents upwards.
In 2014, the market showed a much improved appetite for quality properties much closer to the pre-recession values. Sales of large class A apartment communities have generated bidding wars and demand for product has far outnumbered the supply. This trend is moving into smaller apartment communities now and should be a catalyst for increased sales and prices moving upward over the next 12 months.
As millennials increasingly choose to rent over purchase, new apartments are not coming to the market quickly enough to meet demand. This should ensure rental rates continue to rise for well maintained or repositioned properties in the market. This is providing new owners with a window of opportunity to exponentially grow their returns, making the small apartment market even more attractive to these buyers.
The combination of a backlog of sellers, easier access to financing at historical low levels and opportunities for buyers to add value to new acquisitions should mean a great opportunity for both buyers and sellers of apartment buildings in 2015.
Matthew Wisniewski is a Commercial Real Estate Investment Advisor with RE/MAX Commercial Group in East Lansing. Focusing on both immediate and long term planning for real estate holdings, Matthew assists his clients in positioning their portfolio for maximum growth potential. As a Certified Commercial Investment Member (CCIM) Designee, Matthew has demonstrated his abilities by both educational achievement as well as an exceptional level of success in delivering results in completed transactions.
RE/MAX Commercial Group
300 W Lake Lansing Rd
East Lansing, MI 48823
517-321-2800 Ext 118
The Promise of the Best is Yet to ComeBy Shirley Hyde
The commercial real estate market in Michigan in general has certainly been on the rise for 2014. Commerce in the Tri County areas and especially the Greater Lansing Market has been a positive movement due to banks who have money to lend for new development, new business and growth. The 1031 exchange money has also kept commercial real estate moving, along with some other factors that make the community stand out. Land developers from out of the region are looking for housing projects, multi-family and single family.
The international Chinese student population at Michigan State University (MSU) has contributed greatly to the economic climate. Students are graduating, studying, investing as entrepreneur’s, buying homes, cars and other commodities with cash. Suppliers have begun to settle in who are connected with the AFRIB (Atrial Fibrillation) at MSU as well as General Motors.
Retail Industry is also in a growth pattern. I attended a regional ICSC, International Council of Shopping Centers meeting last July and there were 114 restaurants in Detroit looking for new locations, with Lansing being considered by many. The right product in development will make that happen. New development in this area has to have the right components to work. Those components include tenant mix, location and architecture with an edge.
Look around and you will see prospective renderings being presented to the municipalities and newly constructed projects that have already met the criteria. Large magnets in the retail industry are changing their internal operations. Overall the new generation is starting to make a difference and coming from a company with the second generation stepping into leadership positions, “the promise of the best is yet to come,” is definitely in the works.
Shirley Hyde is in Sales and Acquisitions for Commercial Real Estate at the Eyde Company. Hyde specializes in retail tenant representative and site selection.