Apartments: A Rallying Point for Investors

By Stephen L. Burger, CPM, CRX, CRM

Once again, the apartment market seems to be the clear choice for investors as the long-range economic waters start to grow a bit murky. None of the real estate food groups--whether it be office, apartments, retail, industrial or hotels--can ever be called immune from a downturn, whenever that is likely to happen.

But the multifamily sector once again shows its industry-leading investment potential in news we posted from Fitch Ratings and GlobeSt.com. To recap quickly, the multifamily market posted year-over-year gains in net operating income of 5.4%. That is music to any wise investor’s ears. What’s more, it exceeds last year’s NOI gains of 3.8%, indicating a positive trajectory.

Further, GlobeSt.com reported that, “Fitch expects NOI growth for multifamily properties to continue, given stable market fundamentals and favorable demographics for the sector. From ’14 to ’15, 73% of the multifamily properties within Fitch’s multi-borrower CMBS universe reported NOI increases.”

For the record, this year’s performance of other food groups tells the complete story.Hotels came in second, at 5.1%, but Fitch anticipates a drop in occupancy this year and RevPAR (revenues per available room) declines to follow in 2018. Next up was Industrial at 2.8% and Retail at 1.5%. Office brought up the rear, with a paltry 1.1% uptick in NOI.

I do believe that 2017 will be a good but not great year for commercial real estate investment. We’re at a point in the economic cycle where the pundits, whoever they are, form no consensus as to what exactly the economy will do. They agree only that the current upcycle is getting long in the tooth.

At this point in the cycle as well, investors start looking a bit more cautiously before they leap. They’ve got capital to place and their question becomes where best to place it for the longest-term gain.

Just as it proved its viability in the last, horrific economic unpleasantness, the multifamily sector once again rises above the pack to answer that call.

Steve Burger, President
SteveBurger@ebmc.com
EUGENE BURGER MANAGEMENT CORPORATION

As president and COO of Eugene Burger Management Co., Steve Burger is directly responsible for the overall quality, depth and consistency of management services provided in all 15 regions in the EBMC coverage map.

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