PRESENTING & EVENT SPONSORS

Transcription

1 PRESENTING & EVENT SPONSORS

2 2016 MULTIFAMILY RENTAL MARKET OUTLOOK Presented by: Kevin P. Dillon Managing Director direct

3 Multifamily Outlook Despite uncertainty regarding a rate hike, the economy continues to look upbeat. The multifamily housing market has remained strong thanks to an healthy job market, and the propensity of millennials to rent rather than to own property. Total employment rose by more than 2.8 million jobs during the past twelve months ending October The national unemployment rate was 5.0% as of October 2015, down from 5.7% one year prior. Robust demand for multifamily rental housing, resulting in vacancy at a 13-year low and rising rents. Tight supply of single-family residential housing, leading some would-be homebuyers to rent. An estimated 3.9 million households were under-created due to the Great Recession, with young adults accounting for close to 75% of those pent-up households. Over the next decade, an estimated 440,000 multifamily units may be needed each year to meet the growing demand, based on demographic trends. Completions are expected to rise above the historical average of 270,000 units but remain below the 440,000 units needed over the next few years.

4 Historical Prime Bank Loan Interest Rate 20% 19.50% (1980) 18% 16% 14% 12% 10% 8% 6% 4% 4.75% (1972) 3.25% (2015) 2% Source: Federal Reserve

5 Historical 10-Year Treasury Rate 16% 14% 13.86% (1982) 12% 10% 9.18% (1989) 8% 7.28% (1970) 6% 4.99% (2006) 4% 3.48% (1962) 2% 0% 2.34% (11/06/2015) Source: Federal Reserve

6 2015 CMBS Delinquency Report In September of 2015, the CMBS delinquency rate for all U.S. property types was 5.28%, down 75 basis points from 6.03% reported one year ago. Source: Trepp, LLC

7 Detroit MSA

8 Detroit MSA - Developments NEW INTERNATIONAL TRADE CROSSING DETROIT RED WINGS ARENA M-1RAIL GM WARREN TECH CAMPUS The entire Southeastern Michigan region will benefit from the new $2.1 billion second bridge over the Detroit River, providing another link between the U.S. and Canada. Construction is expected to begin in 2015 and be completed by More than 200,000 Michigan jobs depend on U.S.- Canada trade and the project will generate an additional 12,000 jobs directly and 31,000 indirectly. The six-lane bridge will link Interstate 75 and Highway 401 from Detroit s Delray neighborhood to Windsor, Canada. In September 2014, construction began on a $450 million arena for the Detroit Red Wings which will be accompanied by a $200 million entertainment district. The 20,000-seat arena will eventually be surrounded by a 45-block corridor of mixed-use development consisting of apartments, restaurants, office buildings, parks, and shops throughout Detroit s midtown and downtown neighborhoods. This development is slated to be completed by the summer of In July 2014, construction began on the $140 million M-1 Rail project. The project is estimated to serve up to 8,000 daily riders stretching from downtown to Detroit s New Center neighborhood, improving downtown s infrastructure and providing direct access to 125,000 jobs and 275,000 residents. The 3.3 mile light rail system is slated to be completed by the end of 2016 and is expected to generate approximately $500 million worth of economic development. In May 2015, General Motors Co. announced plans to renovate and expand its Technical Center in Warren, north of Detroit. The project will cost $1 billion and is expected to be completed in The center currently employs 19,000 people and plans to add 2,600 salaried jobs ranging from infotainment to IT to advanced powertrain manufacturing. Ford Motor Co. also has plans to modernize their research and engineering campus in Dearborn. Ford s 10- year plan is estimated at $1 billion.

9 Detroit MSA - Average Price Per Unit (50+ Units) $75,000 $60,000 $45,000 $30,000 $15,000 $41,884 $41,063 $53,307 $50,679 $46,440 $43,824 $38,011 $32,514 $33,675 $16,682 $23,002 $22,934 $29,275 $34,918 $33,120 $59,843 $0 *Through 11/06/2015 Source: CoStar

10 Detroit MSA - Sales Transactions (50+ Units) *Through 11/06/2015 Source: CoStar

11 Recent Market Movers Sales Comparable Fairlane Town Center Lake Village of Auburn Hills Somerset Park Sales Price: $32,625,000 Sales Price: $49,000,000 Sales Price: $216,000,000 Price Per Unit: $163,125 Price Per Unit: $83,904 Price Per Unit: $97,035 Cap Rate: 6.25% Cap Rate: 5.25% Cap Rate: 6.83% Buyer: Institutional - New York Real Estate Fund Buyer: Large Private Capital Foreign Investor Buyer: Large Private Investor

12 Detroit MSA Cap Rate (50+ Units) 12% 10% 10.5% 9.7% 10.0% 10.0% 10.5% 11.6% 11.2% 9.8% 10.3% 9.8% 8% 8.4% 8.6% 8.7% 8.8% 8.2% 7.7% 6% 4% *Through 11/06/2015 Source: CoStar

13 Unemployment Rate 20% 16% October 2015 Unemployment Rate Detroit MSA: 5.5% Michigan: 5.0% U.S: 5.0% 12% 8% 4% 0% Detroit Metro Historical Average = 7.6% United States Historical Average = 6.1% *Projected Source: U.S. Bureau of Labor Statistics DETROIT US

14 Detroit MSA - Employment Growth 6% 4% 3.7% 2.7% 41,100 Jobs Added Year Over Year (September 2015) 3.2% 2.1% 2% 0% 0.4% -2% -4% -4.2% -6% -8% -6.6% *Projected Source: U.S. Bureau of Labor Statistics

15 Detroit MSA - Average Apartment Vacancy Rate 10% 8% DETROIT MSA, 2009, 9.6% UNITED STATES, 2009, 8.1% 6% UNITED STATES, 2015*, 5.2% 4% DETROIT MSA, 2015*, 4.7% 2% Metro Detroit Historical Average Vacancy Rate = 6.4% United States Historical Average Vacancy Rate = 6.0% *Projected Source: Berkadia; Axiometrics DETROIT MSA UNITED STATES

16 2015 Apartment Vacancies Map

17 Detroit MSA Quarterly Asking vs Effective Rent $1,000 $950 Annual asking rent growth has averaged 1.2% since 2000 $924 $972 $966 $900 $919 $850 $800 $750 Annual effective rent growth has averaged 1.3% since 2000 $700 Source: Berkadia; Axiometrics Asking Rent Effective Rent

18 Detroit MSA New Apartment Construction 4,000 3,500 3,000 3,413 2,500 2,855 2,860 2,823 2,716 2,000 1,500 2,284 2,088 Annual Average 1,487 Units 2,014 1,653 1,617 1,000 1,127 1,100 1, *Projected Source: Axiometrics

19 Detroit MSA Multifamily Permits Issued (5 units+) 4,500 4,000 3,500 3,816 3,000 2,500 2,000 1,500 2,659 2,637 2,704 2,967 2,314 Annual Average 1,518 Permits 2,003 1,000 1,162 1, Source: U.S. Census Bureau *Estimated (944 units permitted through 09/30/2015)

20 Asking Rent Detroit MSA vs Peer Markets $1,000 $900 $800 $700 $600 Indianapolis Columbus Cincinnati Cleveland Detroit Indianapolis Columbus Cincinnati Cleveland Detroit Indianapolis Columbus Cincinnati Cleveland Detroit Indianapolis Columbus Cincinnati Cleveland Detroit Indianapolis Columbus Cincinnati Cleveland Detroit Indianapolis Columbus Cincinnati Cleveland Detroit Indianapolis Columbus Cincinnati Cleveland Detroit Indianapolis Columbus Cincinnati Cleveland Detroit Indianapolis Columbus Cincinnati Cleveland Detroit $500 Source: Berkadia; Axiometrics Indianapolis Columbus Cincinnati Cleveland Detroit

21 Vacancy Rate - Detroit MSA vs Peer Markets 12% 10% 8% 6% 4% 2% Source: Berkadia; Axiometrics Indianapolis Columbus Cincinnati Cleveland Detroit

22 Apartment Market Outlook Human Need Premier Asset Institutional Expansion Low Volume New Construction Detroit MSA and Michigan continues to provide higher returns on investment Long-Term Debt at Low Interest Rates

23 Kevin P. Dillon Partner direct

24 PRESENTING & EVENT SPONSORS