Apartment Sales Up 18%; CBRE Still on Top

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 moderate 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 investment 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.'”

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