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MarketSnapshot
At Northmarq, we are committed to offering our clients the latest trends and expert analysis to power their decision making. Our MarketSnapshot suite of reports contains critical market data covering a variety of commercial real estate property sectors. In each report, you will find: Investment sales volume data Average cap rate information Buyer distribution analysis... and more! Single-Tenant Overall Market Single-Tenant Office Single-Tenant Industrial Single- Tenant Retail Multi-Tenant Retail
Latest Publications
Manufactured Housing Market Insights: Rising shipment totals and surging prices highlight strong demand
Highlights: The pace of units shipped spiked to start 2022, reflecting the high cost of housing, the recovering economy, and the persistent demand for manufactured housing.Occupancy in the manufactured housing space rose 20 basis points in the first quarter, reaching 94.2 percent, the seventh consecutive quarter where the rate inched higher. Year over year, occupancy is up 50 basis points. Each of the major regions in the country recorded annual increases in the occupancy rate.Rents have increased 4.6 percent in the past year, reaching $597 per month in the first quarter. The rise recorded in the first quarter was stronger than in the same period in each of the previous two years.Sales velocity in manufactured housing communities slowed at the beginning of the year but are expected to gain momentum in the coming quarters. Cap rates have begun to inch higher, averaging 5.7 percent. In projects that have sold, price growth has surged; the median price spiked to $62,300 per space, with strong gains recorded across several states.Read the report
June 15, 2022
Chicago Q1 Multifamily Market Insights: Conditions stabilize after rapid growth in 2021
Highlights: Property fundamentals posted modest improvements across the Chicago market in the first quarter, as the vacancy rate dipped and asking rents held steady. Demand for existing units continues to outpace new supply growth.The vacancy rate in Chicago ticked lower at the start of the year, dropping 10 basis points in the first quarter to 5.2 percent. Year over year, the rate declined by 60 basis points.After rapid growth in 2021, asking rents remained essentially unchanged in the first quarter at $1,688 per month. Year over year, rents jumped 14.5 percent.During the first quarter, the median sales price rose to $150,300 per unit, and cap rates averaged around 4.6 percent. Sales velocity got off to a more active start to 2022 than in recent years. Read the report
June 15, 2022
St. Louis Q1 Multifamily Market Insights: With vacancy tightening, development gains momentum
Highlights: Operating conditions continued to improve among multifamily properties at the start of the year with vacancies declining and rents rising. After slowing the pace of new construction in 2021, multifamily developers were active to start 2022, with deliveries and permitting accelerating.The vacancy rate improved by 30 basis points in the first quarter, reaching 4 percent. Year over year, vacancy dropped by 150 basis points.The rate of rent growth jumped in the first quarter, rising 4.1 percent in the first three months of the year to $1,101 per month. The recent spike has accounted for nearly half of the total increase in the past year. Rents have pushed 8.4 percent higher in the 12-month period ending in the first quarter.The multifamily investment market gained momentum to start 2022 with more properties changing hands than in recent periods. The median sales price rose to $101,900 per unit, a 9 percent increase from 2021 levels. Recent cap rates averaged approximately 4.5 percent. Read the report
June 14, 2022
Charlotte's multifamily market sees record rent growth, investment sales activity
CHARLOTTE, NORTH CAROLINA (June 13, 2022) - As Charlotte continues to expand its economy and population, its multifamily market is reporting unprecedented levels of activity. The market has experienced a tremendous rebound from the artificial pandemic performance in terms of investor demand, in-migration and rent growth. The market recorded double-digit rent growth in 2021, extremely tight vacancies across sub-markets, record lease-up velocity and a modest supply of new deliveries. All these signs clearly point to a landlord's market, and investors have taken notice. This year looks to be another solid one for Charlotte's multifamily investment market, coming off a record-setting 2021 with nearly $6.4 billion in transactions (compared to $3.5 billion in 2020 and $3.7 billion in 2019). So far in 2022, pricing remains strong and sales are a.head of the pace set at the start of last year ($1 billion in first-quarter 2022 vs. $566 million in first-quarter 2021 ). Companies and residents are flocking to Charlotte, which is increasingly recognized as a high-growth market. It is business-friendly, offers a great lifestyle and is a talent magnet. Lowes, USAA and Centene are examples of companies expanding their footprints and hiring thousands of employees, all who need a place to live. Moreover, these are high-paying jobs ($l00,000-plus), targeting a younger tech-enabled workforce, which bodes well for multifamily market fundamentals. There is already significant pent-up demand from renters, and these companies' expansions have not opened yet. Additionally, soaring housing prices have priced out many would-be homebuyers. Transaction size increasesInvestors are stepping up activity in Charlotte. Ten $100 million-plus transactions closed in 2021, and five such deals have already closed by April 2022. More investment groups are viewing Charlotte as an institutional market, including pension funds, insurance companies, private equity and high-net worth-individuals. The market liquidity is at an all-time high. Despite rising interest rates, deals are pushing through. Northmarq has had $1.7 billion of multifamily assets on the market throughout the Carolinas year-to-date. Many participants would have assumed the interest rate increase would have slowed activity; however, that was not necessarily the case. For prime assets in the best locations, Charlotte's market fundamentals remain incredibly strong. Northmarq was recently awarded an asset that had 15 offers, three rounds of bidding and was as competitive as before the run-up in interest rates. While interest rates are having a slight impact on pricing, the depth of the market of bidders remains robust. For borrowers, the cost of capital has increased, but that is offset by accelerating rent growth. From a capital perspective, investors remain attracted to Charlotte and need to allocate their commercial real estate percentage in high-growth markets like the Queen City, which forecasts strong employment trends and accelerating rent growth for multifamily assets. Fight to qualityIn a sign of flight to quality among investors, nearly every asset was trading at roughly the same cap rate, whether it was value-add or a newly developed, core property. It appears a return to normalization has occurred where value-add is now showing a risk premium relative to newly built core assets. The interest rates have had the least impact at the top of the quality spectrum, and the impact is greater among the deeper, value-add assets. For core assets, cap rates are in the mid- to high 3 percent range, which is above where it was 90 days ago by 25 or 30 basis points, which, remains an attractive price point. Because of the rent growth and asset appreciation occurring over the last several years, investors arc sitting on huge, embedded gains. There is so much profit remaining in these assets that it will continue to drive the investment sales market. For example, Northmarq will soon launch the marketing of Novel LoSo Station, a trophy asset in Lower South End, a popular submarkct for young renters. Northmarq expects very competitive bidding with institutional, all cash groups that arc less sensitive to rising interest rates. Accordingly, Northmarq remains bullish on investment demand in this flight-to-quality environment. Who is lending?Lenders are also focusing on flight to quality. We are still seeing immense demand for multifamily from our lenders, which have an abundance of capital to allocate. That means multiple options for borrowers as lenders are still competing to win business. If 2021 was the year of the bridge lender, then 2022 is the year of the bank and balance sheet lender. Banks, life companies and the government sponsored enterprises (Freddie Mac and Fannie Mac) are seeking multifamily investments and, although the agencies have not been nearly as competitive in the last a year and a half, we arc starting to see them show up again and expect them to regain some market share. While there remains uncertainty and the potential for interest rate increases throughout 2022, Charlotte is well-positioned as an attractive multifamily market for both investors and lenders.
June 13, 2022
San Diego Q1 Multifamily Market Insights: Rent Growth Accelerates to Start 2022
Highlights: The San Diego multifamily market began 2022 on an upswing. Vacancy tightened and rents continued on an upward trajectory. Apartment construction is expected to remain active in the coming quarters as developers rush to meet demand.The vacancy rate dropped 30 basis points in the first quarter, ending the period at 4 percent. Year over year, the rate dipped 10 basis points. Local vacancy reached its lowest level since the end of 2020.Asking rents in San Diego rose 3.3 percent from January through March, reaching $2,226 per month. Year over year, average rents spiked 19.7 percent with additional gains forecast for the remainder of this year.While fewer properties changed hands, prices surged as the median sales price rose to $408,000 per unit in the first quarter. Cap rates remain low, averaging approximately 3 percent at the start of the year. Read the report
June 9, 2022
June Economic Commentary: Consumers bearing the brunt of policies’ unintended consequences
We’re one month into the Federal Reserve’s declared war on inflation. Volatility in the financial markets has increased as investors are positioning for the anticipated economic slowdown resulting from the Fed’s tighter monetary policy. Except in a few instances, it is too soon to see the impact in economic data, however. Consumer spending indicates a continued imbalance between supply and demand. The Fed’s actions are focused on slowing the demand side of economic activity, but the supply side of the economic equation also continues to aggravate inflationary pressures. Consumer Metrics: CPI, Disposable Income, Savings RateThe year-over-year Consumer Price Index (CPI) for April fell to 8.3% from 8.5%. The decline was largely due to favorable comparisons to year-ago figures as the big rise in prices in March 2021 was deleted from the calculation. As we go through the year, easier comparisons to last year’s inflation numbers are expected to result in lower year-over-year numbers. Still, inflation will be elevated and likely higher than the Fed wants to see. Energy, food, and shelter costs are all rising because of insufficient supplies relative to demand. Consequently, markets expect the Fed to continue raising interest rates throughout the year. As discussed in previous commentaries, disposable personal income adjusted for inflation is indicating that incomes are not keeping up with inflation. Consumer purchasing power is eroding, resulting in the need to dip into savings or increase the use of credit. The savings rate, at 4.4%, is the lowest since 2008. The latest consumer credit figures showed the biggest jump on record: $52 billion in March. Although consumer balance sheets are in good shape, there is a question of how long the current level of spending by consumers can be sustained as financial conditions tighten. The drag on consumer budgets from higher essential costs like food and energy is leaving less room for discretionary merchandise purchases. Housing MarketOne area of the economy that is showing some immediate effects of the Fed’s tightening policy is the housing market. With mortgage rates now at 12-year highs and home prices appreciating at nearly 20% year over year, home affordability is at the lowest level since 2008. This is evidenced by the slowing in both existing and new home sales – both are down year-to-date. Pent-up demand and lack of inventory will likely keep prices supported, but the rate of price appreciation will probably fall back to mid-single digits this year. First-time home buyers are being particularly impacted. The supply of lower-priced homes is not nearly enough to satisfy demand. EmploymentThe May employment report showed a better-than-expected gain of 390,000 in non-farm payrolls with the unemployment rate holding at 3.6%. The labor force participation rate ticked up to 62.3% from 62.2%. Year-over-year average hourly earnings growth eased to 5.2% from the previous month’s reading of 5.5%. Surveys of firms’ compensation plans suggest this is the beginning of a gradual deceleration in wage growth coming over the rest of the year. The labor market remains tight, but as the Fed raises interest rates, the job market is expected to slow. Fed Funds RateThe Fed is responding to the highest inflationary pressures of the last 40 years by increasing the Fed Funds rate and beginning to reduce the size of its balance sheet. The combination of these two strategies have never been used in a high-inflationary environment such as we have today, and at a time when the overall economy is already starting to slow. The Fed is expected to increase the Fed Funds rate by another 50 basis points (bp) at each of their next two meetings (June 15 and July 27). Markets are pricing in additional increases of 25 bp at each of the remaining meetings this year, which would bring the Fed Funds upper target to 3.00% by February 2023. Such an upward move in the Fed Funds rate, in addition to the ongoing unwinding of the Fed’s balance sheet, will definitely cause the economy to slow. The economy is experiencing the unintended consequences of the extraordinary fiscal and monetary policies that were designed to support demand during the pandemic coupled with the impact of unforeseen supply chain disruptions. The resulting imbalance between supply and demand is causing the inflationary pressures of today. It is unknown whether the Fed will pull back from their tightening strategy if the economy weakens more than expected, or if they will continue to fight the war against inflation. Fear that the Fed may make a policy mistake at this important juncture is the source of the present volatility we’re seeing in markets today.
June 9, 2022
Build-to-Rent (BTR) property type offers positive demand outlook
MINNEAPOLIS, MINNESOTA (June 9, 2022) - Liquidity and an incredibly positive outlook for single-family build-to-rent (BTR) properties is helping to offset some of the turbulence developers are experiencing from rising interest rates. Developers have been ramping up the pace of single-family BTR construction over the past five years with forecasts that call for a record high 60,000 new units to be completed in 2022. That volume shows a steady increase over the 53,000 units completed in 2021 and 49,000 in 2020, according to Northmarq’s recently released Single-Family Build-to-Rent Properties Special Report. Although financing across all property types has been impacted by upward movement in both short- and long-term borrowing rates, the BTR sector is in a good position to shake-off those challenges and maintain its growth momentum. Higher construction and financing costs are being offset by rising rents with year-over-year rent increases, that in many areas of the country, are quite substantial. Developers also are finding good access to both debt and equity. The number of lenders that are active in the space is expanding as developers move into new markets and continue to prove out business models and performance with successful lease-up and dispositions. For example, Northmarq’s Dallas regional office provided acquisition financing for the first BTR acquisition made by Morgan Properties, Inc. The 136-unit ParcHaus at Skyline (since re-branded as Elevate at Skyline) was near stabilization at the time of final construction certificate of occupancy. The newly completed community is located in the Dallas suburb of McKinney and offered one- and two-bedroom units at rental rates that were significantly below the cost of local homeownership. The Northmarq team secured the acquisition financing though a regional bank that provided a floating rate loan at very attractive terms. Plenty of Available CapitalBanks are the dominant sources of construction financing and select balance sheet lenders also are providing construction loans in a larger format. Developers that have a large pipeline of deals might opt for a balance sheet lender that can handle the larger loan volume. On the take-out financing, the agencies are the main sources of capital for stabilized assets. Both Freddie Mac and Fannie Mae have been active in financing BTR properties. Many BTR properties offer a cost-effective alternative to home ownership, which speaks to the mission business of agency lenders. Life insurance companies also are expressing more interest in financing BTR product. Equity players are looking to gain a bigger foothold in the BTR space, whether that is through joint venture (JV) partnerships on new development or buying stabilized assets. In 2021, companies announced commitments of more than $10 billion toward development and acquisitions in the single-family BTR space. That demand also is evident in sales activity and pricing trends. Projects totaling approximately $2.3 billion changed hands in 2021, more than doubling the 2020 total, according to the Northmarq report. Transaction activity has slowed during the first half of 2022, in large part due to interest rate volatility. However, several properties are actively being marketed for sale and are expected to transact in the coming quarters. Pricing continues to trend higher for single-family build-to-rent communities. In deals that closed during the fourth quarter alone, the median price reached $360,000 per unit, with about one-third of sales topping $400,000 per unit. For example, Northmarq’s Build-to-Rent group marketed and sold five BTR communities with a total of 411 units for more than $168 million. The communities were located in Arizona, Texas and South Carolina. Currently, Northmarq has two dozen active BTR listings across its national platform, and marketing activity is pointing towards continued upward trajectory in prices in 2022. Positive Outlook for DemandThe story across the broader rental housing market is strong demand that is being fueled by two different groups – those renting out of necessity or choice. For BTR properties, the affordability of purchasing a single-family home continues to move farther out of reach for many as home price soar and mortgage rates rise. The national median single-family home price approached $370,000 in the first quarter, with annual price growth topping 15 percent, according to the Northmarq report. Mortgage rates have jumped more than 200 basis points to hover at 5.25 percent. On a $300,000 loan, an increase in mortgage rates from 3.5 percent to 5.25 percent results in an increased interest payment of more than $430 per month. Especially for people where affordability is an issue, or there is a concern about buying a home when values could be at a peak, the BTR sector gives people the type of single-family home they want in a purpose-built format. On the other side, there is more demand from the “renter by choice” consumer. There is a deep pool of people, including empty nesters and retirees, who prefer to rent versus own a home for a variety of reasons, such as flexibility, convenience and a desire to avoid the maintenance and upkeep that often come with owning a home. That demand is reflected in the BTR fundamentals that remain very strong. Projects being built are leasing very quickly, rents are increasing at a healthy rate and there are no signs of waning investor demand. Much of the development has been focused on high-growth Sun Belt states that have available land to build. Since the beginning of 2019, the South region has accounted for 46 percent of the delivered BTR units in the country, and in the past year that figure has moved past the 50 percent mark. However, it also is important to note that developers are continuing to expand into new markets nationally. Northmarq is currently tracking roughly 500 BTR projects across more than 20 states. BTR is a maturing sector that is continuing to attract more and more institutional capital. Although it is still a specialty product, it is no longer the small niche product that it once was. That evolution also is evident in the types of highly amenitized properties that are being built to create not just homes, but purpose-built communities for the people who choose to live there.
June 9, 2022
Northmarq opens Nashville office
MINNEAPOLIS (June 1, 2022) – Northmarq opens a new office today, bringing experienced leader Bryan Schellinger from Los Angeles to lead the growth. The Nashville team will collaborate with existing Northmarq offices across the Southeast and Midwest to provide the company’s full range of services, including investment sales, debt, equity, and loan servicing. “This location is a great bridge from our existing teams in Atlanta, Charlotte, St. Louis, and Kansas City, and is an important growth market for us and many of our clients,” said Trevor Koskovich, president – Investment Sales. Schellinger, a long-time California resident, decided to relocate to open Northmarq’s Nashville office, seeing a huge opportunity to leverage his diverse transactional experience across all multifamily asset classes and land/development opportunities. “Tennessee offers a tremendous opportunity to help our clients evaluate core and value-add properties in high-growth submarkets across the state as the region continues to be a magnet, attracting educated and talented young workers and highly skilled professionals across remarkably diverse employment sectors – Nashville is the epicenter of that growth,” Schellinger said. “The transition also allows me the unique opportunity to leverage my land disposition expertise, which was refined over the years in California, so I am excited to enter a market that does not possess the same regulatory environment yet offers similar, if not better, opportunities for business growth.” Schellinger, who relocated in May, has hired one associate broker, Brenden Bercaw, to open the office with him. Northmarq anticipates hiring at least two debt and equity experts, along with support staff by the end of 2022. The office is located at 414 Union Street, Suite 1900 #34, Nashville, TN 37219.
June 1, 2022