Dive Brief:
- Despite posting the highest volume of any commercial real estate sector, apartment sales fell 44% year over year to $6.7 billion in May, according to a report that data firm MSCI Real Assets shared with Multifamily Dive.
- May’s drop was the steepest of any month this year, so far. Both individual assets and portfolios saw declines, falling 40% to $4.6 billion and 60% to $2.5 billion, respectively.
- After seeing prices fall for over a year, The Real Capital Analytics Commercial Property Price Indices declined 1.0% in May. After peaking in July 2022, prices have fallen more than 20%.
Dive Insight:
Mid- and high-rise apartment transactions fell 60% to $2.5 billion, while sales of garden properties declined 26% to $4.3 billion.
While the sluggish sales figures show that some buyers may still be waiting for a more advantageous environment, others have seen prices decline 20% over the last two years and are confident in making deals.
“This, to me, is the best buying opportunity since 2010 and 2011,” said Matt Sharp, co-founder of Old Lyme, Connecticut-based Hamilton Point Investments, which owns and manages 11,000 units. “There are so many markets — Houston is a good example — where the population growth is still extraordinary, but development outpaced it.”
As that happened, rents and occupancies dropped and concessions increased, putting pressure on developers of newly built projects to sell.
“Brand new construction at low replacement costs in markets like that is where we see and love the opportunities,” Sharp said.
Sharp thinks the window to buy these new projects should last at least through this year, though he doesn’t expect a dramatic decline in interest rates.
“We're thinking things stabilize a little bit and the market adjusts to these interest rates, which fall to a five-year fixed rate at 5.75%,” Sharp said. “That was 3.75% two years ago, and it was 6.75% a year ago. But there is definitely a great buying window right now because there are sellers that need to sell, especially new construction.”
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