Last year was the Year of the Monkey, according to the Chinese zodiac.
But in Denver, 2016 was the Year of the Multifamily.
The multifamily industry in the Denver area was one for the record books last year.
More than $4.5 billion in apartments traded hands in 2016, according to Jeff Hawks, vice chairman of ARA Newmark.
Jeff Hawks
“To put that into perspective, there were $3.5 billion in apartment sales from 1990 to 2000,” Hawks noted.
“In other words, we had $1 billion more in sales last year than in an entire decade,” Hawks said.
Hawks, as one of the keynote speakers at the upcoming 2017 Multifamily Development & Investment Conference sponsored by the Colorado Real Estate Journal, will address the monumental multifamily market in 2016, as well as peer into his crystal ball for what is in store for 2017.
The conference to be held from 7:30 a.m. to 11:45 a.m. March 16 will immediately be followed by the 2017 Hotel & Resort Summit & Expo, also sponsored by CREJ.
Both conferences will be held at the Hyatt Regency Aurora-Denver Conference Center at 13200 E. 14th Place in Aurora.
More than 500 people are expected to attend the multifamily conference, the largest multifamily development and investment conference of the year in Colorado.
In addition to Hawks, other featured speakers will include Cary Bruteig, owner of Apartment Appraisers & Consultants, and Michael C. May, executive director of Cantor Commercial Real Estate. Apartment Appraisers & Consultants and ARA Newmark, are sponsoring the event with CREJ.
Not only was there a record dollar volume in sales, but a record number of transactions.
The new breed of multifamily communities, many with amenities such as dog walking parks and bicycle repair shops, were especially hot.
“We did almost three times as many sales of brand-new properties last year than we had in the three years before 2016,” Hawks said.
One thing noticeable was that there seemed to be fewer offers for each apartment community that hit the market near the end of 2016 than during the first half of the year.
That is true, but not a sign that investors’ appetites for apartments are waning, according to Hawks.
Cary Bruteig
Drilling down, there are a number of reasons why a multifamily community might receive six to 12 offers in the last quarter of 2016, while many communities were receiving 16 to more than 20 offers in the first half of the year.
Product mix
Hawks said more value-add properties hit the market in the first half of the year and more expensive core communities were sold in the fourth quarter of 2016.
There is always more money available for value-add deals, not only because they are less expensive than newer, core apartments, but also investors know they can earn more on the improvements than on the acquisition price.
Debt issues
Some of the bigger properties had assumable debt, which means there will be fewer prospective buyers. Buyers liked to put on their own debt, taking advantage of record-low rates.
Leasing
A number of new communities hit the market that were still in lease-up and were not yet stabilized. Some institutional buyers only want stabilized properties with a large portion of the units already leased.
Plates full
Some investors plowed so much money into multifamily communities that they hit their asset allocation numbers earlier in the year.
Rising interest rates
Some deals were put on hold last fall when interest rates rose. Rising interest rates likely will continue to be a trend this year.
On the other hand, all of the multifamily communities in the ARA office that were put on hold, with the exception of one, have since sold, Hawks noted. And the holdout is about to be put back on the market, he said.
And there are plenty of buyers out there still eager to own apartments, Hawks said.
Brokers in Denver’s ARA Newmark office have a list of 200 investors who are interested in buying a multifamily community in Denver, but have not yet pulled the trigger, he said.
“There are still a lot of buyers out there looking to ramp up,” Hawks said.
While last year was the Year of the Monkey, 2017 is the Year of the Rooster.
That is apropos, as there is still plenty to crow about, as far as the multifamily market in Denver goes.
