Dive Brief:
- Apartment sales increased 18% year over year in October, hitting $11 billion, according to a report that data firm MSCI Real Assets shared with Multifamily Dive. However, that total is still 35% below the five-year average for an October before the pandemic.
- Cap rates were at 5.4% for garden properties and 5.7% for mid- and high-rise assets. While they have been flat over the past couple of months, they’ve risen 20 to 30 basis points from the start of the year.
- Prices fell 6.1% YOY in October. However, they only dropped 0.3% from September, suggesting a more moderate 3.7% annualized decline.
Dive Insight:
MSCI’s October report and recent commentary from apartment REIT executives on their third-quarter conference calls generally paint a picture of an improving sales market in the nascent stages of a recovery.
Transactions for individual properties rose 5% to $9 billion, while portfolio deals jumped 159% to $2.1 billion in October. Mid- and high-rise apartment sales increased 38% YOY to $4.7 billion in Q3. Sales of garden properties ticked up 7% YOY to $6.4 billion.
Apartment sales volume has grown relative to last year in four of the last five months, according to MSCI. However, many apartment executives still don’t see a lot of movement.
“The transaction market, it's still pretty thin,” said Matt Birenbaum, AvalonBay Communities' chief investment officer, on the Arlington, Virginia-based REIT’s third-quarter earnings call earlier this month. “There's still not much activity. And we're not seeing distress.”
But many observers expect things to pick up in 2025.
On the Houston-based REIT’s fourth-quarter earnings call earlier this month, Camden CEO Ric Campo said the conditions exist for more properties to come to market next year.
“You have $650 billion worth of multifamily debt coming due, merchant builders who have [preferred equity loans] that are eating into their profits, banks who want their loans paid down,” Campo said. “So there'll be a very robust transaction market over the next couple years.”
Couple that with what Campo calls “tons of dry powder” waiting to find deals and the environment seems ripe for more apartment sales in 2025.
“People are starting to come to the market … ,” Campo said. “There's just massive wealth capital that needs to get deployed, and it's going to deploy to multifamily.”
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