Deal Maker Team Monthly Newsletter
Building Slump Over?
While it can’t yet be described as positively giddy, builders were palpably upbeat this week, predicting rising construction demand in virtually every segment of the non-residential market this year, according to an annual survey released by the Associated General Contractors of America (AGC). While the survey of contractor sentiments reflects a mostly upbeat assessment by an industry staggered by five years of slow recovery from the Great Recession, a new set of worries emerged among respondents: growing worker shortages, rising materials and business costs, and the impact of new regulations and federal budget cuts.
National Multifamily on the Rise
The U.S. apartment market continued to see robust growth in2013, but investors are keeping a wary eye on looming changes going into 2014, including the impact from rising supply, rising interest rates and the prospects of restructuring the nation’s two biggest government-sponsored enterprises (GSE’s) Fannie Mae and Freddie Mac… The supply wave already is affecting some market indicators, including gradual reductions in rental growth and increases in vacancy, according Luis Mejia, CoStar’s director of U.S. research, multifamily. The aggregate fourth quarter 2013 CoStar data for 50-unit-plus properties shows a year-over-year effective rent growth pattern that is consistent with increasing competition. As landlords adjusted concessions to lure renters, annual effective rent growth declined from 4.9% in the first quarter to 2.7% in last quarter of 2013, after peaking above 7% in 2012.
Multifamily Residential slow in 2013, Strong outlook ahead
Sales activity in the Tucson Multifamily Residential market declined sharply in 2013. Year-over-year data shows declines in all major indices, total volume traded, number of transactions, dollar volume, and price per unit and per square foot. In 2013 owners found little motivation to sell. Net operating incomes stagnated causing owners to wait for improved market. Also factoring into the slowing market was the rise in interest rates. The increased cost of capital reduced the number of optimistic buyers. Fortunately a number of economic indicators forecast increased activity in the coming years. The improving job market will increase occupancy and net operating incomes. 2013 saw vacancy rates drop half a percent to 9.41% and a slight uptick in average rent. The northern submarkets continue to see the strongest growth. The university submarket continues to be strong; however, new university construction may cause some disruption in the university submarket.