The multifamily bubble isn’t bursting yet, and if savvy investors are in the know, it doesn’t look like it will any time soon.
Lone Star Funds, a private-equity group, has agreed to acquire REIT Home Properties Inc. for about $7.6 billion. It is apparently the largest apartment REIT buyout since the Great Recession.
More consolidation is expected to follow, especially with the smaller regional operators of assets. Though the housing market seems to be gaining some steam, it is not taking away from what is happening in commercial real estate’s apartment sector. Millennials are looking more to rent in urban areas instead of buying homes, and it is driving up multifamily fundamentals.
Last month Axiometrics reported that multifamily occupancy is at an all-time high. The research firm found that the rate was at 95.3 percent last month. Additionally, home ownership is at a 25-year low, at 63.7 percent.
This is helping make other firms acquisition targets. Private-equity giant Blackstone Group is apparently looking at the apartment sector, which means that it is gaining serious consideration from buyers in this financial realm.
A Bloomberg analyst has speculated that many apartment REITs are to follow in the private-equity bullseye. Some of the firms apparently under the magnifying glass are Camden Property Trust, Mid-America Apartment Communities, and Post Properties. Most of those companies’ assets reside in the southern United States.
Meanwhile, multifamily vacancy rates are shrinking at levels not seen in years in some locales. North Texas is looking at a 95 percent occupancy rate. In Manhattan it’s really hard to find an apartment. Even Idaho is feeling the vacancy pinch.
Multifamily rents continue to climb, and more construction is considered sorely needed, according to the Urban Institute.
Will the bubble ever take place or are we seeing a multifamily boom for years to come? Thoughts?