Top 5 Markets for Transaction Growth

Nationwide, smaller markets drew the lion's share of investment activity this year through May, based on Yardi Matrix data.

The coronavirus outbreak has put a dent in real estate investment activity nationwide. The total sales volume for multifamily transactions declined by almost a third in the first five months of 2020 compared to the same interval last year, according to Yardi Matrix data.

While transaction volume decreased in most major multifamily markets across the nation, some smaller regions have seen their dollar volume go up by double or triple digits, as investors sought value-add opportunities in less expensive areas. The combined transaction volume for these regions totaled a little more than $500 million in the first five months of 2020.

5. Huntsville, Ala.

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As a result of increased interest from big tech companies due to its highly educated workforce, Huntsville was, in part, better prepared to deal with the effects of the current crisis. The metro consistently had some of the lowest unemployment rates in the country, and, while it undeniably took a hit, its jobless rate stood at 10.6 percent and 380 basis points below the national average, according to April projections. A strong employment market resulted in substantial demographic growth, with Huntsville expected to overtake Birmingham as the state’s largest city within a decade.

Investors closed three deals in the first five months of 2020 in the metro, for a combined $101.4 million, up from the $27.5 million that traded during the same interval last year. In the Huntsville-Southwest submarket, Covenant Capital Group acquired the 736-unit Reserve at Research Park from B&M Management for $81.5 million, the largest deal completed so far this year. The sale was subject to a $61.3 million Freddie Mac loan from CBRE Capital Markets.

4. Augusta, Ga.

With Georgia classifying construction as essential during the statewide shelter-in-place order, developers continued to work on projects. As a result, while the metro was bleeding jobs in major employment sectors, construction jobs were not severely affected. As was the case throughout the country, the leisure and hospitality sector suffered the hardest blow, losing more than 12,000 positions in the 12 months ending in April and contributing to a substantial decline in the metro’s unemployment rate, which stood at 10.6 percent as of April. That’s still well below the national average of 14.7 percent. Meanwhile, the number of construction jobs rose by 1,000 positions during the same period, thanks to increased development activity underway prior to the pandemic.

Seven properties changed hands year-to-date through May in Augusta for a total of $82.8 million—more than triple the $19.2 million that traded during the same period in 2019. Capital Square 1031 purchased four of the seven assets in a $69.9 million deal with Angelo Gordon & Co. The Richmond, Va.-based company entered the market with the acquisition of 640 units situated in the Augusta-West, National Hills and Aiken submarkets.

3. White Plains, N.Y.

Image via Public Domain Pictures
Image via Public Domain Pictures

With New York hit harder than any other state, the White Plains employment market has drastically shrunk. Almost 1.5 million people lost their jobs in the 12 months ending in April, with some 500,000 losses reported in the leisure and hospitality sector alone, marking a 68.4 percent decline. With all nonessential development activity halted during the state’s stay-at-home order, the construction employment sector lost more than 110,000 positions, equal to a 40.7 percent drop. And while deliveries declined in 2019 by more than 40 percent, completions were forecast to reach a record of 2,835 units this year. It’s still unclear how many of the 18 projects initially slated for completion in 2020 will come online by year-end.

Transaction activity in White Plains was modest in the first half of 2020, registering two sales totaling $61.6 million. That’s still more than three times as much as the $13 million in sales volume recorded in the first five months of last year. In Port Chester, Anthos Properties paid $38.6 million to Phoenix Partners for a 120-unit community. The Nanuet, N.Y.-based firm acquired the asset with the help of a $28.7 million Fannie Mae loan from JLL.

2. Wilmington, N.C.

Wilmington, N.C., has been on our radar before, thanks to its strong multifamily performance in terms of both rent growth and occupancy growth. After being heavily hit by Hurricane Florence in 2018, the metro faced only minor flooding as a result of Hurricane Dorian last year. But the impact of the 2018 natural disaster contributed to an initial decline in multifamily construction activity, followed by a rapid surge in new projects underway. Before the outbreak, more than 1,400 units were projected to reach completion by year-end—the highest level in decades. While construction was classified as essential during the state’s stay-at-home orders, completions will inevitably be affected. It remains to be seen exactly how many of the six communities scheduled to come online in 2020 will reach completion this year.

Overall, increased interest in the metro’s multifamily market contributed to a surge in investment activity. Year-to-date through May, investors closed three deals for a combined $110.5 million, up more than 500 percent from the same period last year. Wilmington’s largest transaction year-to-date was Strata Equity Group’s $45.5 million acquisition of the 223-unit One Midtown in the Glen Meade-Lincoln Forest submarket. Wilkinson Real Estate Advisors sold the eight-building property in a transaction facilitated by a $29.6 million Fannie Mae loan from Walker & Dunlop.

1. Detroit

Image by Ken Lund via Flickr

As a result of population expansion, thanks particularly to Millennials, rent growth was solid throughout last year. But Detroit’s efforts to diversify its economy translated into job losses in some employment sectors well before the COVID-19 crisis. The pandemic affected all sectors and as many as 500,000 workers lost their jobs in the 12 months ending in April. Employment in the leisure and hospitality sector dropped by almost 60 percent, with a total of 117,900 positions lost, followed by the construction and manufacturing sectors, with 123,000 jobs lost. As a result, unemployment in Detroit surged to 25.9 percent as of April—the city’s highest level in more than three decades and one of the highest rates in the country.

For a multifamily market this size, Detroit witnessed several underperforming quarters in terms of transactions over the past two years. In the first five months of 2019, investors closed only two deals totaling $16 million, paving the way for a remarkable increase in 2020. Year-to-date through May, investors completed five transactions for a combined total of $152.6 million. JRK Property Holdings’ acquisition of the 981-apartment Independence Green in the Farmington Hills/West Bloomfield submarket was the largest multifamily transaction of 2020 so far. The Los Angeles-based firm paid $99.5 million to Hayman Co. for the 67-building asset.