Month: April 2018

Fannie Mae and Freddie Mac Continue to Dominate Apartment Lending

Freddie Mac and Fannie Mae lenders are providing the overwhelming majority of permanent loans to apartment properties.

“Fannie Mae and Freddie Mac are probably still the premiere lenders for leveraged apartment buyers,” says Mark Isaacson, co-founder of Redwood Capital Group, a real estate investment management firm focused on the multifamily sector. “Both are very competitive right now.”

Agency lenders are making more permanent loans than ever on apartment properties. Borrowers chose loans from agency lending programs for nearly two-thirds of the permanent financings completed in 2017 despite limits set by federal regulators (loans to certain kinds of apartment properties, including affordable housing, are not limited by the caps).

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Apartment Occupancy Rate Remains Strong, Though Down from its Peak

Developers opened a tremendous number of new apartment units in 2017. But the percentage of apartments that are occupied has barely shifted, despite competition for potential residents. Rents continue to grow in most markets.

That’s good news as multifamily developers look forward to another busy year in 2018 with even more new apartment properties scheduled to open. “The onslaught of new supply is certainly testing the ability of the multifamily market to absorb incoming projects,” writes Victor Calanog, chief economist with real estate research firm Reis Inc. in his “First Glance” report for the first quarter of 2018.

If the apartment markets can survive another onslaught of new construction in 2018, the next few years should be easier, as the number of new units coming on-line drops.

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Demand, Supply Still Sky High in Miami

The city’s multifamily market displays solid fundamentals and a diverse economic profile, although it remains challenged by a substantial amount of new supply.

Miami’s multifamily market is heading into a healthy 2018. It displays solid fundamentals and a diverse economic profile, although it remains challenged by a substantial amount of new supply. While rent growth started decelerating in mid-2016, population and job gains have been cushioning the drop, producing healthy demand and ensuring that new units are slowly but steadily absorbed. The metro’s average rent climbed to $1,593 as of January, up 1.8 percent in 12 months.

 

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Economy Watch: Most Metros Enjoying Lower Unemployment Than a Year Ago

Unemployment rates were lower in February than a year earlier in 319 of the 388 U.S. metro areas, according to the Bureau of Labor Statistics.

Nearly concurrent with the national employment report released late last week, the Bureau of Labor Statistics also reported that unemployment rates were lower in February than a year earlier in 319 of the 388 U.S. metropolitan areas, higher in 48 areas, and unchanged in 21 areas. That is arguably better for commercial real estate absorption than national numbers, since company growth and site selection tends to take place on a local basis.

 

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Economy Watch: Chinese Investment in US CRE Plunges

Following the Chinese government’s announced restrictions on outbound capital flow, the country’s investments in U.S. commercial real estate dropped significantly in 2017, according to Cushman & Wakefield’s 2017 China-U.S. Inbound Investment Capital Watch report.

Chinese investment in U.S. commercial real estate dropped dramatically in 2017 after China’s State Council implemented a framework regulating outbound investments, according to a report released by Cushman & Wakefield on Tuesday. In March, the Chinese government further clarified capital controls under which investments in real estate and hospitality assets are classed as restricted, but not prohibited.

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