Multifamily Market will Continue to Perform: MHN Interview with RubinBrown’s Bryan Keller

The 2014 Apartment Statistical Data report is an annual survey compiled by RubinBrown’s Real Estate Services Group. It includes operational data for 2013 and represents approximately 420 apartment projects in roughly 30 states.
Keller

RubinBrown, an accounting and business consulting firm with more than 450 team members in Denver, Kansas City and St. Louis, recently released a new report on the nation’s multifamily housing industry. The 2014 Apartment Statistical Data is an annual survey compiled by RubinBrown’s Real Estate Services Group. It includes operational data for 2013 and represents approximately 420 apartment projects in roughly 30 states.

According to the report, the apartment sector posted a strong economic position in 2013, thanks to strong demand which continued to outpace supply. These positive trends continued into 2014, with rental growth and occupancy levels remaining consistent. Not only did they lead to a stronger financial position for the industry, but they also helped spur property value appreciation to pre-recession levels, and brought multifamily investors back into the market.

RubinBrown expects the U.S. multifamily market to perform strongly into the coming years. The report said that economic and demographic indicators point towards a solid, healthy market. However, it also warned that it’s important not to lose sight of looming threats, such as the immigration reform or tax reform. Read the entire report on RubinBrown’s homepage, www.rubinbrown.com.

Bryan Keller, CPA, partner-in-charge of RubinBrown’s Real Estate Services Group, recently talked to MHN about the state of the nation’s apartment market.

MHN: How did the US apartment market perform in 2014?

Keller: The apartment market is certainly on fire as we near the close of 2014. Sales volume is hitting record highs across the county, especially for apartment projects with 100 or more units. It’s a seller’s market.

MHN: Which states or areas performed best—and worst?

Keller: The highest prices are obviously located on the largest metropolitan markets, West and East Coast for example. But areas such Denver, Nashville, Seattle and other dynamic markets are thriving. Developers have not built enough units in these markets to keep up with natural population growth as well as anticipated growth of transplants.

MHN: What were the most important drivers?

Keller: Rents have remained strong, vacancies low and investor demand strong with access to low interest mortgage rates. Developers have not built enough new properties to absorb the demand for multifamily rentals. Several factors also influencing these trends are 1) shifting demographics with millennials who prefer to rent instead of buy—and who expect a full array of amenities, which developers are providing in new product; 2) record-high student debt loads; 3) tougher first-time underwriting requirements; and 4) the for-sale condo market has not recovered since the financial downturn. There is a significant amount of equity looking to invest in multifamily real estate, much more than there was five years ago.

MHN: What were the top three most expensive and the top three most affordable markets in the nation?

Keller: Northern and Southern California, New York City, Washington State and Washington, D.C. come top of mind as most expensive. Most affordable markets are secondary or fly-over states, Missouri, Kansas, Indiana, Kentucky and smaller markets. That said, active buyers, developers and investors are looking for deals in the secondary states due to being priced out of bigger markets.

MHN: What can we expect in the future?

Keller: We expect 2015 to remain very strong for both conventional and affordable apartment communities. We have not seen an over build situation and wouldn’t expect that for next year. New product has not fully absorbed demand across all segments—affordable, entry, mid and upper end. There remains demand across all these in both new construction and acquisition rehabilitation apartments.