PORTLAND, OR - The multifamily market plunge that started last year, is expected to continue throughout 2009. Only 30 multifamily transactions, at a total sales volume of $62 million, were recorded in the year's first quarter. Of those transactions, only three included properties with 50 or more units.
In the first quarter of 2008, 49 transactions worth $483 million, were recorded, according to figures from Colliers International. This year's sales volume so far is miniscule, said Colliers International multifamily investment broker Gary Winkler, a coauthor with Colliers broker Beth DuPont of a recently released first-quarter report on the multifamily market.
According to the report, the multifamily market will continue its "much needed correction." In doing so, the trend of a tenants' market – wherein landlords offer concessions and lower rents to tenants – will continue, as brokers expect declining values to become the norm.
Winkler believes multifamily investments are down due to the low overall rate of investment return available to apartment owners, especially those who offer lower rents.
"It's rare now to find (an apartment owner) who's not offering some type of concession," Winkler said. "And if they are not doing that, then they are lowering rents considerably."
The president of the Rental Housing Association of Greater Portland, Phil Owens, called it an unnerving time for the otherwise "stoic" multifamily investors because apartments typically have a much smaller profit margin than other forms of real estate.
Owens attributes the slack multifamily market to rising unemployment rates. He said they share a directly proportional relationship.
"We got a boost a while back when all these people with subprime loans were forced to find other living arrangements," Owens said. "But we've reached a (low) point now."
The economic downturn has been so prolonged, Owens added, that it has forced many tenants to either move home with their parents or into apartments or houses with roommates.
First-quarter numbers show a slight uptick in the multifamily housing vacancy rate: It has risen to 5 percent during the first quarter of 2009, from 3.8 percent a year ago.
"We're definitely seeing a lot of softness in the market," said Norris, Beggs & Simpson Executive Vice President Blake Hering Jr. "For the urban market, you're definitely going to see some (softness continue) due to all the condominiums being converted to for-rent properties."
But the softness in the market has not directly impacted Hering's ability to secure refinancing for apartment complexes. He's the exception, perhaps, and not the rule: During the first quarter, he secured $25 million in financing for three apartment complexes in the Portland metropolitan area.
For Hering's transactions, lenders at State Farm Life Insurance Company provided $10.5 million for the 235-unit Squire's Court Apartments in Clackamas, $10 million for the 240-unit Riverwood Heights Apartments in Tigard, and $4.5 million for the 124-unit Cedar Square Apartments in Cedar Hills.
"In a glacially slow-moving commercial debt market, this is a positive sign that some lenders have remained active and competitive for high-quality assets with well-positioned ownership," Hering said.
Source: DJCoregon.com