Ella Shaw Neyland, president of Irvine, Calif.-based Steadfast Income REIT, knows the multi-family market. And she knows, too, that the states of Indiana and Kentucky are strong markets for this commercial property sector. Midwest Real Estate News recently spoke with Neyland about the strength of the multi-family market and the reasons why her company have moved into the states of Kentucky and Indiana.
Midwest Real Estate News: Steadfast Income REIT is building a big presence in Indiana and Kentucky. Why is that? Ella Shaw Neyland: One of our very first assets was in Kentucky. We have always liked that market. Kentucky is a big market for us. Indiana we got into at the end of 2012. We did the same in Tennessee. The one thing that these markets have in common, and really many of the markets across the Midwest and the Great Plains have in common, is a solid foundation for recovery and growth. Those markets didn’t go down as hard as some of the coastal markets. They didn’t have to dig out as much from the same problems as some of the other markets across the country did.
MWREN: Kentucky seems to be a particularly popular state these days for commercial real estate developers and brokers. Why do you think that is? Neyland: Job growth is important. Kentucky, on a percentage basis, according to the Census Bureau is experiencing the second-highest job growth in the country.These are markets that have banks that stand behind them, businesses that stand behind them. The banks are lending in these markets, and that is making a big difference. There are also a lot of public projects taking place in the state right now. When you have those three divers – job growth, confidence and public projects – it drives the demand for apartments.
MWREN: You mentioned that businesses are committed to the state of Kentucky. What are some examples of that? Neyland: In Louisville Zappos (the online shoe retailer) has made a huge investment. The UPS facility in Louisville is huge. Most of the people working these plants are in a price point where they can afford a Steadfast apartment. We love the Louisville market. Another growth business in Kentucky is healthcare. Humana is there. Kindred Healthcare is there. There is a big medial presence in Louisville and in many major markets in Kentucky. GE and Ford are adding additional plants in Louisville.
MWREN: Are you seeing big businesses moving into Midwest locations at a greater rate these days?
Neyland: . Definitely. Look at Des Moines, Iowa. Google is adding a data center there. We have some properties in the Des Moines area, and having Google there will help us. Microsoft has a big data center facility in the Des Moines area. The big businesses are moving into the Midwest.
MWREN: Do you think the multi-family market will remain as hot in the next few years? Neyland: We see multi-family remaining strong for a long time. There are a multitude of reasons for that. There’s been a generational shift in the way people view residential living. They are moving away form homes. Some have to, but most of them, many of the Millenials, they like the lifestyle that comes with renting. They like the flexibility to be able to move easily to a new job. They saw their parents lose money in their homes. They don’t like mowing grass on Saturday afternoon. They want to be out, jogging, going to the theater, visiting with friends, sitting at the coffee shop on Saturdays, not working on their homes. They embrace the idea of rental housing. People will still buy homes. But you won’t see the homeownership rate return to that 69-percent level.
MWREN: The bad economy has created pent-up demand for rental housing, too, right? Neyland: There is pent-up demand caused by the lack of the normal rate of household formations. When kids get out of school today, they don’t have the financial wherewithal to get apartments by themselves. So they’re moving back in with their parents. Or they are doubling or tripling up on roommates. They are not forming as many households as they normally would have been. When the economy starts to improve, you’ll unleash this pent-up demand. We are about 2.3million households behind the normal rate of formation. When the economy improves, some of these people will buy houses. But many will also rent their own apartments. They’ll leave their parents homes and move into rental housing.
MWREN: What are renters looking for these days in apartments? Neyland: It depends on their price point. There is actually a decreased demand for luxury apartments, for the very expensive, high-amenity properties. There is a niche of people who want a home style without moving into a home. There is a small percentage of people out there who can afford that kind of rent. But other renters are looking for quality apartments with an urban lifestyle. The markets that are doing well now, markets like Lexington and Frankfort in Kentucky, you are seeing beautiful recently constructed communities with a residential feel. They feel like home. But they are also located next to shops and restaurants. They can walk wherever they need to go. It’s the best of both worlds, a residential setting with an urban lifestyle.