Multifamily Sector to Remain at Top of Investors' List in 2012

By Barbra Murray, Contributing Writer

Los Angeles—The multifamily sector has been investors’ flavor of the year, and as per the results of commercial real estate services firm Jones Lang LaSalle’s Apartments Outlook 2012 Survey, it appears the sentiment will continue in 2012.

“No real big surprises, it only confirms what we hear from investors everyday about the multifamily sector having the best fundamentals in commercial real estate today with some of the best financing options available,” Darcy Miramontes, executive vice president with JLL’s Capital Markets, tells MHN.

JLL queried 150 private investors, real estate brokers, developers, REIT and institutional investors to get a clear picture of what types of multifamily properties they are seeking and where they are looking. Sixty-seven percent of the survey participants listed value-added assets as the top priority when buying. With apartment demand on a steady rise, these assets can provide increasingly high cash flow, particularly following a makeover, and they also present an opportunity to buy low and sell high.

Roughly half of the respondents, 52 percent to be exact, favor transit-oriented properties. Coastline Capital Partners’ Eric Freedman, a survey participant, gives a good argument in a prepared statement. “Where are the people going to be, where is the demand always going to be? Even when the market goes down, or when it goes, if you can find a place where people want to live and work–that’s what we’re targeting.”

As for the all-important location, location, location, respondents noted that they plan to focus their investment activity in Los Angeles, San Francisco, Dallas, San Diego and Phoenix. These top five markets for 2012 mark a significant change from 2011, when New York City and Washington, D.C., headed the list. “There is a shift away from the heavyweight cities of New York City and D.C., which many investors may not be able to penetrate because of the over whelming competition, not necessarily because of the market fundamentals,” Miramontes explains.

As for those locations where owners plan to post for-sale signs, Washington, D.C., where apartment property values are on the upswing, is high on the radar screen, along with Las Vegas, Los Angeles, Atlanta, Houston and Phoenix.

The apartment sector is firmly in place at the forefront in investors’ eyes, and it seems it will hold the spot at the top through the upcoming year. “Everyone needs a place to live, but they don’t always need to expand their commercial space,” she says. “Low occupancy and rising rental rates will define multifamily in 2012.  Beyond that, if multifamily development in each market is kept in check, apartment fundamentals will continue to improve, and investor demand for multifamily will continue.”