Cap Rates Defy Logic As Rent Growth Looks Up

Anna Caplan |

DALLAS—Industry experts met via webinar Wednesday to discuss the state of the country’s multifamily market. The2015 Kickoff Webinar of Apartment Development, hosted by locally based Humphreys & Partners Architects LP, focused on the sector’s key components including design and finance-related issues.

Doug Bibby, president of the National Multifamily Housing Council, spoke about broad-based concerns, including supply and demand (still unbalanced), starts and completions (there’s an uptick) and whether the market is overbuilt (no, not as of yet, he said).

“It’s not clear if renting is the ‘new normal,” Bibby said, adding that today, President Obama will give a housing-related speech related to FHA down-payments.

But, Bibby says: “Cap rates are defying logic.”

Greg Willett, with MPF Research, backed the program up with stats. With 4.7% growth in new leases, “it’s a really encouraging story on the rent-growth front.”

Willett said, to be in the top 10 markets last year, you had to see 6% rent growth. The top cities included Oakland/San Jose, Calif., and San Francisco. The fact that no Texas city made the list has more to do with the rest of the country “catching up, rather than a deceleration,” he said.

Other data made a strong case for multifamily in Texas, with Dallas/Fort Worth leading the pack: The metro area combined for more than 52,000 completions from 2010-2014.

Willett summed up his presentation on an ambiguous note, saying the “wild card” next year will be mobility.

Humphreys & Partners’ Mark Humphreys, CEO, and Greg Faulkner, president, outlined design issues for the sector. The company oversaw more than 100 projects, approximately 15% of the US market, last year. Humphreys shared that in his experience, people are “looking for larger units these days.”

A bulk of the company’s projects are E-Urban (efficient urban design) style properties. Interestingly, there’s a trend toward “UOBs” too. That would be Uber-Oriented Developments, Humphreys added, referring to the popular car-service’s coverage area.

The webinar concluded with a financing overview, with input from Jason Piering, executive vice president/capital markets, for JLL in Dallas.

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