Month: January 2020

Proximity to Rail Service to Play a Bigger Role in Industrial Site Selection

As rail service has become faster, industrial developers are increasingly considering rail access in site selection.

A growing truck driver shortage, along with improved efficiency of U.S. rail operations, has more shippers considering rail transportation as a viable alternative to long-haul trucking. As a result, some developers are placing new industrial development projects adjacent to rail access sites.

Industrial developers and investors are considering the advantages of rail access when choosing locations for new projects, says Tray Anderson, who heads the logistics and industrial services platform in the Americas for real estate services firm Cushman & Wakefield. While rail access doesn’t drive location decisions, it has become a risk mitigation strategy, offering an alternative to trucking if the driver shortage escalates.

Rail’s efficiency, safety, cost savings and superior delivery windows are widely recognized, says Reagan Shanley, executive vice president of industrial development at Denver-based The Broe Group and its affiliate OmniTRAX, a railroad developer/operator that connects businesses to class I railroads nationally. A 2018 American Trucking Association’s study found that moving products by rail was 45 percent less expensive per ton than shipping by trucks. The exceptions, according to Anderson, include non-competitive destinations only served by one rail line and seasonal shipments of agricultural products, when pricing escalates.

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Apartment Outlook 2020: Riding the Zenith

Flush with capital and boosted by solid fundamentals, multifamily real estate rolls into the new decade with an optimism that seems almost too good to last.

Carl Dranoff is like the M. Night Shyamalan of multifamily real estate development. Rooted in Philadelphia since receiving his MBA from Harvard in 1972, Dranoff has succeeded through multiple economic cycles by adopting a maverick mentality and a cut-no-corners approach to developing high-end, placemaking properties across the City of Brotherly Love. With a zig-when-they-zag strategy for finding emerging investment opportunities, Dranoff follows a personal credo that “if you follow the pack, you’ll always be behind the curve.”

So when Dranoff unloaded his six-property luxury apartment portfolio to Denver-based Aimco in April 2018 for $445 million, market watchers took notice. On the surface, Dranoff’s subsequent move into for-sale, high-rise condominium development has had all the marks of the developer’s iconoclastic market timing. Even as investor demand for multifamily has continued to boost asset valuations in Philadelphia and nationally, Dranoff has tapped into a parallel (and unmet) demand for luxury condos from buyers discontented with the single-family home market supply.

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There are 218 cities in the U.S. where the “typical” home costs at least $1 million

Zillow report shows how much it costs to buy a “typical” home in the U.S.

The luxury real estate market had a bumpy 2019, but ended in a steady rise in luxury home prices.

In the first quarter of 2019, luxury home prices declined for the first time in almost three years, and sales saw their largest decline since 2010 as supply increased by double digits.

Luxury home prices later increased 0.3% year over year, marking the first time in nearly a year that luxury prices did not fall.

Now, there are 218 cities with a typical home value of at least $1 million, three more cities than there was in December 2018, according to a new report from Zillow.

In its report, Zillow said that an average of just under 20 cities a year broke the $1 million threshold from 2014-2018, including a high of 25 in 2017 when home value growth was approaching 7% per year.

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Market Monitor: Six Top Multifamily Metros

Take a look at how multifamily is faring in Dallas-Fort Worth, Denver, Miami, Phoenix, Seattle, and Washington, D.C.

With data and insight from RealPage as well as Hanley Wood’s Metrostudy and Meyers Research, the Multifamily Executive staff takes a deep dive into the state of housing in six of the nation’s top metropolitan areas for multifamily activity: Dallas-Fort Worth, Denver, Miami, Phoenix, Seattle, and Washington, D.C., which includes its surrounding Maryland and Virginia suburbs.

The following reports offer some insight as to how the markets will fare in 2020. Each one is chock-full of data, from building activity to average rents. Consistent across all six of these markets are job growth and strong local economies, which are positive signs for the apartment market.

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U.S. Tightens Rules for Foreign Deals’ Security Risk Reviews

The new rules will have an increased focus on real estate transactions.

(Bloomberg)—The Trump administration on Monday issued long-awaited rules that will intensify scrutiny of foreign investment in U.S. companies.

The final regulations, which will go into effect on Feb. 13, put teeth in a 2018 law that expanded the authority of the Committee on Foreign Investment in the United States, or Cfius, to examine national security risks posed by foreign deals. More cross-border transactions will now be subject to reviews by the inter-agency panel, exposing a greater number of deals to the risk of rejection by the U.S. government.

“These regulations strengthen our national security and modernize the investment review process,” Treasury Secretary Steven Mnuchin said in a statement. “They also maintain our nation’s open investment policy by encouraging investment in American businesses and workers, and by providing clarity and certainty regarding the types of transactions that are covered.”

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Buying A Home Is More Affordable Than Renting In 53 Percent Of U.S. Housing Markets

Renting More Affordable Mainly in Suburban and Urban Counties; Home Price Gains Outpacing Wages in 66 Percent of U.S. Markets

IRVINE, Calif. – Jan. 9, 2020 — ATTOM Data Solutions, curator of the nation’s premier property database and first property data provider of Data-as-a-Service (DaaS), today released its 2020 Rental Affordability Report, which shows that owning a median-priced, three-bedroom home is more affordable than renting a three-bedroom property in 455, or 53 percent, of the 855 U.S. counties analyzed for the report.

However, the analysis shows a split between different-sized markets, with ownership more affordable mainly in lightly populated counties and renting more affordable in more populous suburban or urban areas.

The analysis incorporated recently released fair market rent data for 2020 from the U.S. Department of Housing and Urban Development, wage data from the Bureau of Labor Statistics along with public record sales deed data from ATTOM Data Solutions in 855 U.S. counties with sufficient home sales data (see full methodology below).

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Here’s where rent prices surged – and where they didn’t – in 2019

Nationally, cost of rent went up 4.1% for one-bedroom units

As 2019 saw historically low vacancy rates among multifamily housing, it also led to a rising cost of rent, too.

According to realtor.com, a report from Abodo said rental prices went up in 38 states, including Washington, D.C., in 2019. In the other 12 states, the cost of rent actually fell, but only slightly.

Nationally, median rents for one-bedroom units went up 4.1%, making monthly rent $1,078 at the end of 2019.

Prices for two-bedroom units went up 5.5%, making monthly rent $1,343.

In 2019, multifamily occupancy rates reached as high as 96.3%. The demand of multifamily housing keeps rising, as home prices are also continuing to climb.

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Lenders Enter 2020 Willing to Fund New Apartment Construction

Lower interest rates are helping offset rising labor and materials costs and helping sustain apartment construction levels.

As fears of a possible recession and overbuilding in the multifamily sector diminish, lenders are showing they still have an appetite for financing construction projects. The availability of mezzanine loans and lower interest rates are helping fuel this activity and helping to offset rising construction costs.

Even if the economy shrinks sometime in 2020 or 2021, multifamily pros believe demand for apartments is still strong enough to prevent major damage to apartment properties in most markets—even with the thousands of new apartments recently opened by developers across the country. “There is clear evidence that multifamily is the asset class best equipped to weather a downturn,” says David G. Shillington, president of Marcus & Millichap Capital Corp., based in Atlanta, pointing to overall fundamentals in the sector that remain healthy.

“Occupancy rates continue to stay steady in the face of new supply,” adds Bill Leffler, senior vice president of equity and structured finance for CBRE, based in based Atlanta. “The strong economic conditions, job creation and population increases (in the southeast) still fill up the new product hitting the market.”

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Banks Focus CRA Dollars on Affordable Housing

The banks see the affordable and workforce housing sectors as steady investments.

Banks provide more than $100 billion in capital each year to low and moderate-income communities as part of their Community Reinvestment Act (CRA) investing requirements. Increasingly, they are focusing those dollars on supporting affordable housing projects.

“As a regulated institution, we are required for CRA purposes to make these types of community development investments, but we are really passionate and purposeful about impacting our communities,” says Keitt King, head of Truist Community Capital. Truist is the new entity from the recent merger of SunTrust and BB&T. “I like to think we would be doing this at Truist whether the regulators required this of us or not. We see it as good business, and an opportunity to build our communities.”

Prior to its merger with BB&T, SunTrust had announced a $60 billion community benefit plan that Truist will now be executing over the next three years. Part of that commitment includes a $3.6 billion commitment to CRA eligible investments.

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Eight Predictions for the Industrial Sector in 2020

Industrial properties have been highly sought-after by investors for the past several years. Will that trend continue in 2020?

New project deliveries, continued cannabis legalization, a decline in manufacturing, faster e-commerce deliveries and the upcoming presidential election will all have an impact on the U.S. industrial sector in 2020, experts say. Here are eight predictions for the industrial sector in the new year:

1. The rush to cannabis production will likely accelerate in 2020, as more states legalize marijuana for recreational use, attracting investors to the higher returns cannabis-related real estate provides compared to more traditional property types, according to Chuck Taylor, director of operations for Englewood Construction, which collaborates with cannabis firms on cultivation and dispensary projects.
2. Demand for “last mile” warehouse space will continue to grow in 2020, as consumers demand same-day and next-day delivery and retailers intensify their delivery efforts to complete with e-commerce giants like Amazon and Walmart, says Nat Kunes, senior vice president of investment management at AppFolio, a property software firm. As a result, he expects to see conversion of traditional retail space to distribution facilities.

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