MARKET SNAPSHOT: “Cincinnati Will Be a Great Place to Invest in the Future”

By Erika Schnitzer, Associate Editor Cincinnati—Compared to other markets in the midwest, the Cincinnati/Northern Kentucky region has fared well “because it doesn’t have a huge auto influence and has a pretty diverse economic base,” asserts Debbie Corson, CPM, CCIM, principal in Apartment Realty Advisor’s (ARA) Dayton, Ohio office.Effective rents have increased slightly more than 1 percent, and concessions have decreased from one year ago. According to ARA’s first quarter Cincinnati/Northern Kentucky Multifamily Report, both market and effective rents were up $9 from one year ago—to $702 and $673, respectively.Corson attributes this to the “slowdown in apartments coming online with very little product delivered.” Only about 700 units are slated for delivery this year. The overall market is achieving approximately $0.76 per square foot, while the downtown market’s average rent is over $1.00 per square foot, or $915 per unit.Overall occupancy has dipped slightly from one year ago—from 92 percent to 91.7 percent. The West and Middletown submarkets represent the lowest occupancy, as of March 2009, at 88.4 percent and 88.6 percent, respectively. Corson attributes this to the fact that these areas have a lot of older product, whereas there has been a lot of movement to the newer communities.Furthermore, Class A properties have performed better than Class B and C, reports Corson, and those developments in the Northeast submarket are faring the best—at a 94.7 percent occupancy level.Transaction velocity has slowed considerably, and cap rates have increased 150 to 200 basis points. Furthermore, lenders do not view these markets favorably, so the “debt coverage ratio tends to be higher than in other markets,” admits Corson. “That translates into less Loan-to-Value, so buyers coming to Ohio have to put more equity into the deal.”The most recent transaction in this area was the sale of the 301-unit Trellises in Northern Kentucky for $19.5 million, or $64,784 per unit. Corson notes that it’s the first deal of any size since December 2008.Despite this, Corson maintains that now is a great time to invest for those that have the equity to do so. “If something comes on the market, you ought to take a good look at it because a lot of things coming on the market do make sense,” she advises. “There isn’t competition in the buying market, and people putting [property] on the market know they won’t get 5.5 or 6.0 percent caps anymore. When you have the opportunity to buy at relatively low interest rates and there is little building going on and inflation on the way, it’s a great time to buy.”As for when the market will turn, Corson believes that the MSA shows strong investment opportunity. “We don’t go through such extreme ups or downs, so for someone looking for stable returns, Cincinnati will be a great place to look in the future,” she says.Click here for last week’s Market Snapshot on Nashville.