Integra Survey: Multifamily Valuations Have Stabilized; Will Go Up

New York--Commercial real estate has been looking for that elusive turnaround ever since the Panic of 2008.

Dees Stribling, Contributing Editor

New York–Commercial real estate has been looking for that elusive turnaround ever since the Panic of 2008 and even the credit freeze before that, and it looks like the multifamily sector, at least, might have found it. According to the results of Integra Realty Resources’ 2Q 2010 Commercial Property Index, the multifamily sector has stabilized during the last three months.

The index is based on a survey using Integra’s national database and a polling system to determine the rate of change in property values across the country and in all property types, including multifamily, lodging, industrial, retail and office. Integra is a consulting firm that specializes in the valuation of CRE, holding no vested interest in the eventual purchase or disposition of the assets.

The survey, which was conducted in July, shows that lodging and office property experienced the greatest declines in value over the past 12 months: down 10 percent and 9 percent, respectively. During 2Q10, the lodging sector experienced a decline of 2 percent, while the office, retail, and industrial sectors experienced a decline of 1 percent.

At the same time, the multifamily sector was stable without any increase or decrease in value during the second quarter of 2010. “During times of recovery, multifamily recovers faster than the other major property types,” Jeffrey Rogers, president and COO of Integra, tells MHN. “One thing you can count on is population growth and the need for temporary housing in major cities. It makes this property type more predictable and thus less risky. Your cap rates will be lower, but so will your risk.”

Rogers stresses that there still remains a lot of uncertainty in the market and an unforeseen catastrophic event could alter the trend. Still, for the most part, the data is encouraging for the multifamily sector, both nationally and in some regions. For example, the eastern United States has demonstrated the best performance according to the survey, with its multifamily sector increasing 2 percent in value during the past quarter.

Looking ahead, some regional property values are expected to increase in the second half of 2010, with multifamily markets leading the pack. Valuations for eastern U.S. multifamily, as well as central U.S. multifamily, are forecast to grow by 2 percent during 2H10. Southern multifamily and Western multifamily are expected to stabilize during the next six months.

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