Multifamily experts assured a crowd of nearly 200 industry professionals at Illinois Real Estate Journal’s Chicagoland Apartment/Multifamily Summit March 23 that the multifamily market, despite few concerns, is doing great. In fact, it was said that “if you’re active in the market, it’s a great time to be here” because of readily available capital.
Held at the Montgomery Club in Chicago, the event kicked-off with a presentation from keynote Speaker, Don Devries with Appraisal Research Counselors, on the latest multifamily market updates, including: unemployment rents, suburban occupancy, class A rents downtown, downtown occupancy trends and the downtown pipeline.
The State of the Market discussion followed the presentation, with moderator, Kenneth Motew, Mo2 Properties. Speakers included Ryan Engle, Marcus & Millichap; Alan Lev, Belgravia Group; Rebecca Lostia, CLEAResult; and Todd Stofflet, KIG.
Takeaways included the lack of condo construction taking place. They said that when looking at the rental market as a whole, its losing more and more baby boomers, which is something to be aware of because baby boomers are a big part of the sale market right now.
Another highlight was the increase of renovations throughout the neighborhoods. This is because renovated buildings are beginning to sell more due to big budgets for creating amenity spaces like rooftops. And it looks like this trend will continue as experts explained that product out there will try to renovate in order to raise rents.
When Motew asked the panel if interest rates were a concern, experts said there’s less concern with interest rates than with concession. With more product coming online, there are more worries about concession and expense increases, and that dynamic will play a bigger role on cap rates than with income taxes.
In their final remarks, the State of the Market panel mentioned that there are two things to keep in mind. Affordable housing, experts said, is an important goal for the city and yet, it doesn’t come up very often. They also expressed that it’s a time to be cautious and prudent—specifically when underwriting and buying.
Patrick Tuohy led the Current Trends in Financing & Investing, Development and Management panel, which included speakers: Igor Zhizhin, American Street Capital; Fenton Booth, Ogden Partners, Inc.; Michael DAgostino, Kiser Group; Mike Daniels, Cagan Management; and David Fetter, Chase.
Experts said that on one side, there are some concerns on construction lending and some construction lenders are going to be a little more cautious on how they look at deals. There will be more focus on the developer and the lender’s experience with them while also considering the location and several other factors.
The good news is that there have been more lenders, especially within the last year. The panel said that more banks have stepped in.
CMBS is active, too, and they added that the market will be seeing more aggressive terms this year. Meanwhile, Investors have been highly dependent on location, loaner and developer.
Experts also explained that there’s been a big push with foreign nationals who have no ownership history and no tax return history in the U.S., and yet, they are getting the same leverage as someone who has been here a long time. They said that’s what is making it very competitive today, all across the board.
In terms of development, the panel said what’s increased dramatically is the number of transit-oriented developments. Three years ago, they said, no one would have ever thought about developing along train stops. Now, California and Milwaukee is the hottest area you can move into.
The next big core we can expect to see will be neighborhoods like Ravenwood, Logan Square, Uptown and Rogers park, which the panel said has seen more rent growth.
When it comes to management, the market will be seeing more tech and property managers will eventually become more than just the landlord and instead, someone that’s more of a community for the residents. Experts added that “management companies are going to be more of a lifestyle situation.”
And as for the biggest challenge clients will face in 2016? Class A new construction.