Is the Party Over?

2014 was a strong year for multifamily investors. The highest apartment construction levels since the Great Recession were easily absorbed by a growing need for housing. Vacancy remains near record lows. Freddie Mac continues to invest aggressively in commercial multifamily. Still, it makes sense to look ahead and see if the good times will continue. This analysis predicts some markets will have an inventory surplus. The risk is market-centric. Apartment buildings don’t appear overnight. Experienced managers have already factored new construction into their budgets and leasing strategies. And we still have the second largest generation in U.S. history not fully engaged in the rental market. In short, markets with solid population and job growth will continue to experience growth in the multifamily sector.

Speaking of Millennials, they continue to lag behind historical household formation levels. The economic factors that prevented many Millennials from entering the housing market are easing. And the largest 1-year cohorts in the U.S. are entering their prime renter years.

San Antonio is part of the Texas Triangle. This article provides a nice summary forecast. It also provides a case study for the two pieces we mentioned above. Construction is up. So is occupancy. As a result, developers continue to build multifamily units in submarkets that make sense.

December was an extremely busy month at 37th Parallel Properties. We are pleased to announce our acquisition of The View At Lake Highlands in Dallas, TX. This deal was our largest to date, by any metric. It was also our first deal in the Dallas Metroplex. The deal was sourced by one of our Multifamily Partner teams. This is the fourth straight acquisition (totaling over $35,000,000 in asset value across all four deals) sourced by our Multifamily Partners. Watching our teams develop a market and then close deals has been very satisfying. We want to continue this model in 2015 and beyond.

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