The multifamily market, as is it in most Midwest cities, is thriving in Cincinnati. To learn why, Midwest Real Estate News spoke with Stash Geleszinksi, managing director with Capstone Apartment Partners in Cincinnati.
If you want to learn even more about Geleszinksi’s view on the multifamily market, be sure to attend REjournals’ 4th annual Cincinnati Commercial Real Estate Summit. Geleszinksi is one of the market experts who will speak at this big event.
How strong is the multifamily market in Cincinnati today?
Stash Geleszinksi: There is demand for assets in Cincinnati. But the demand is for assets of size. The demand does not match our supply right now. We have lots of investors who want to build, say, a 140-unit multifamily portfolio. To do that in Cincinnati, they’d have to invest in three assets. There are a lot of investors who really want that single 140-unit asset.
People will come to me and say they want to buy 1,000 apartment units in Cincinnati. I’ll say, ‘Great. Good luck.’ It’s just not there right now.
How challenging is that lack of supply?
Geleszinksi: That’s the main reason why we don’t have the volume of transactions that we could have. We have a lot of longer-term owners. They keep their properties for a long time. What is interesting, though, is that when we do get newer groups or groups coming in from other cities, they are demonstrating that if you execute a good value-add you can push the apartment rents in Cincinnati. The old-school thinking was that you could never get $1-a-square-foot rent in downtown Cincinnati. Now we are seeing rents at the new 1010 On The Rhine in downtown approaching $3 a square foot.
Is that old-school mentality, then, starting to change in Cincinnati?
Geleszinksi: It is. As these newer groups have accumulated a mass of units, we are seeing changes. They are selling out of their older workforce housing assets and are trying to trade up into newer construction. They might be building something new or renovating something someone else has recently built. The best way to put it is that there is a flight to quality going on. That is leaving opportunities for other investors. Granted, they might have to purchase a building that has a lot of deferred maintenance. But the opportunities are there for the next person to come in, shine it up and make an opportunity out of it.
How strong is the multifamily market in downtown Cincinnati?
Geleszinksi: That is the most active submarket in the city. There are several projects that are either recently completed in downtown in the last couple of years or are under construction now. You have the new Kroger grocery store and 1010 On The Rhine above it. You have 4th & Race, the new luxury apartment tower by Flaherty & Collins. North American Properties has an apartment project under construction and completed two previously. Those are just the large projects. Between downtown and the Over-the-Rhine neighborhood, there has been a concerted effort by the city and developers here. They are injecting so much capital into the city’s core. They are revitalizing it and bringing it back to life.
Are those efforts making a big difference?
Geleszinksi: They really are. The core was rotten before. There was no investment here for far too many years. Now downtown Cincinnati is the cool, hip and trendy place to be. It’s partly a demographic shift, of course. People want to live in more walkable areas. They want to have amenities close enough so that they don’t need to get into cars all the time. They don’t want to be as dependent on cars. We are seeing both young people and older people moving into downtown Cincinnati. My wife works on a board here in the city. I ran into the woman who chaired that board walking in downtown Cincinnati recently. She was on the tail end of her career or maybe even had retired already. She said she had just moved to downtown and that she loved it. She was out walking with a friend and getting her exercise for the day. That is a tremendous thing. We are seeing both ends of the spectrum right now in downtown Cincinnati.
The apartment development there reflects that. We are seeing some three-bedroom units with two or three baths. There aren’t many of them, but there are some. Some of the rents are getting higher, too. We are seeing some of the higher-end units renting for $5,000 a month. A kid fresh out of college can’t afford that. That is for the empty nester, the retired executive or people at the tail end of their careers.
What amenities are you seeing in the newer apartment units coming to Cincinnati?
Geleszinksi: At 1010 On The Rhine, there is that Kroger on the first floor. There hasn’t been any new grocery store in downtown before this for 50 years. That is a nice change for the downtown. You’re also seeing the usual amenities, the fitness centers, laundry in the units, granite countertops, stainless-steel appliances.
What’s interesting is that North American Properties is completing an apartment project that has no parking by design. They are looking for those renters who are using ride shares or the Bird scooters we have in downtown. The streets in downtown Cincinnati are as crowded with those scooters as they are with cars. There are also plenty of surface lots around, so they are relying on those to fill the gap. Of course, we are not New York City. You do need a car sometimes even if you are in downtown Cincinnati.
I know you can’t predict the future, but what kind of year do you think 2020 will be Cincinnati multifamily?
Geleszinksi: I think it will be another strong one. The demand is there for existing assets with the value-add components. You can come in and renovate those units and get that rent pop. We are seeing that in Cincinnati. But we are also seeing the new developments. A lot of these will replace dead or dying former neighborhood centers. Shopping centers that are defunct are being redeveloped. There is a movement to look at the old big boxes not for the boxes but for the sites themselves. Can we put a mixed-use property there? We have our eyes on a few of those throughout the state and in the Cincinnati market in particular, too.
