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HZ News Apartment Sales Up 18%; CBRE Still on Top

February 6, 2019

Apartment Sales Up 18%; CBRE Still on Top

Hamilton Zanze was featured in Real Estate Alert’s recent apartment market update:

Sales of apartment properties soared 18% last year, blowing past the previous record as the multi-family sector became commercial real estate’s most-active segment.


A total of $110.2 billion of large rental properties traded, up from $93.5 billion the year before, according to Real Estate Alert’s Deal Database. The tally was well above the previous high-water mark of $96.9 billion set in 2016 — and more than double the $51.8 billion peak of the previous cycle.

Capitalization rates — especially on value-added deals — in many markets have compressed to levels well below historical averages, as bidding contests have driven up prices. But those valuation gains are expected to slow, market experts said, making buyers more reliant on rent growth to meet their return goals.

There are also concerns about interest-rate volatility, after recent swings in the benchmark 10-year Treasury rate. “We’re looking to achieve yield for our investors, and to have that yield eaten by debt service is obviously a concern,” said David Nelson, managing director of acquisitions at Hamilton Zanze of San Francisco.

Similar concerns were present at the beginning of last year, but didn’t prove strong enough to hamper trading. And some of them appear to be easing. The Federal Reserve has signaled a pause in rate increases. Construction is projected to be moder- ate this year and fall subsequently. Meanwhile, the renter pool continues to grow, increasingly populated by millennials and empty nesters.

The upshot: Brokers are reporting strong pipelines, and in- vestment shops plan to keep deploying capital into the sector.

“We did about $525 million on the acquisitions side last year,” Nelson said, “In the first quarter of 2019 we’re going to close on approximately $325 million, so we’re off to a very fast start.”

In some cases, buyers are shifting their strategies to adapt to market trends. Hamilton Zanze historically focused on value- added properties, but has recently turned to core-plus deals. “Value-added cap rates have compressed a lot more than core- plus cap rates,” said Nelson. “It’s been incredibly competitive, and we weren’t able to get the returns that we wanted in the value-add space.”

Read the full story at REAlert.com