Multi-Family Market Snapshot

Indianapolis
Multi-Family Market Snapshot
Third Quarter • 2014
Economy
Indianapolis Multi-Family
Economic Indicators
3Q 13
3Q 14
12-Month
Forecast
Indianapolis Employment
945K
966K
Indianapolis Unemployment
6.6%
5.1%
U.S. Unemployment
7.2%
6.1%



3Q 13
3Q 14
12-Month
Forecast
127.4K
130.4K
6.1%
5.8%





Market Indicators
Inventory
Overall Vacancy
Net Absorption
764
1,309
Under Construction
2,667
3,729
Average Actual Rent
$954
$968
Net Absorption/Asking Rent
Four Quarter
Trailing Average
4Q Trailing
Average
1,200
$860
1,000
$840
$820
800
$800
600
$780
400
$760
200
$740
0
$720
-200
$700
2010
2011
2012
Net Absorption
2013
2014
Asking Rent, $/Unit
12%
10%
Historical Average = 7.9%
6%
4%
2%
0%
2010
Consumer spending has also rebounded sharply from the beginning
of the year, and that is perhaps one of the most encouraging data
points in the latest economic numbers. Inflation has picked up
fairly quickly. All of the major indices (the PCE deflator, CPI and
PPI) are running above 2% on an annualized basis over the past
three months. The Fed has, so far, been relatively dismissive of this
emerging trend, as a good portion of it has been driven by some of
the more volatile components of inflation measures, like energy
and food prices, rather than from more persistent price pressures.
So despite this uptick, we still don’t see rising inflationary pressures
as being enough to move the Fed to raise the federal funds rate
this year. Still, the “feeling” that inflation is back may allow some
landlords the latitude they need to raise rents.
Market Overview
Overall Vacancy
8%
Indianapolis is recovering steadily as a wide array of private
industries is contributing to job growth. Construction, leisure/
hospitality and business and professional services are leading
the way, while finance and manufacturing are also propelling
employment gains. Over the past year, Indiana’s unemployment
rate has fallen by 170 basis points, which is one of the largest
rates of decline in the U.S. Over the same period, the jobless
rate for the Indianapolis-Carmel MSA has continued to track
lower than both the state and national averages and currently
stands at 5.1% on a non-seasonally adjusted basis. Middle- and
higher-wage industries are seeing some of the strongest growth
lately, a factor that had largely been missing throughout the
entire post-recession recovery/expansion period.
2011
2012
2013
2014
The Indianapolis multi-family market absorbed 1,309 units
during the third quarter, elevating net absorption for the year to
2,373 units and continuing a streak of five years of uninterrupted
occupancy growth. As a result the multi-family vacancy rate for
all classes of product currently registers 5.8%, a decline of 30
bps from a year prior. Strong demand metrics continue to drive
new development, with 1,771 units delivered thus far in 2014
and another 3,729 units under construction. Despite the
delivery of new units, strong underlying demand metrics and
favorable demographics will be sufficient to translate into
IndIanapOlIs
Multi-Family Market Snapshot
Third Quarter • 2014
continued declines in vacancy rates in the majority of
submarkets for the next 12 to 18 months.
In the investment arena, multi-family transaction volume remains
solid with over 4,500 units sold in the greater Indianapolis
market in 2014. Notable investment sales for the year have
included Waterside at Castleton, Harrison Place, Madison Park,
Southgreen Apartments, Inverness Apartments, Villa Paree,
Eagle Creek, Quail Run, Suncrest, Arbor Manor and Shadeland
Historical
pricing Trends
INVESTOR INTEREST IN MULTI-FAMILY REMAINS SOLID
iNVeSTOR iNTeReST iN MUlTi-FAMilY ReMAiNS SOliD
Rolling 12-mo Total ($M)
Quarterly Volume ($M)
$600
$500
$400
$300
$200
Despite the delivery of new units, strong
underlying demand metrics and favorable
demographics will be sufficient to translate
into continued declines in vacancy.
$100
$0
2011
2012
2013
2014
Sources:
Cassidy Turley,
RealReal
CapitalCapital
Analytics Analytics
Sources:
Cassidy
Turley,
actual Rents vs. Vacancy
Court. This investor interest in Central Indiana has compressed
cap rates for Class A, suburban properties to the mid-to-low 6%
range, nearly 100 bps below prior-year levels. Because cap rate
compression in primary market cities has dropped into the
mid-to-low 5% range, investors have sought higher yield
opportunities in historically strong secondary multi-family
markets such as Indianapolis.
VACANCY ReMAiNS
ACTUAl
ReNTS
AReARE
RiSiNg
VACANCY
REMAINSSTeADY
STEADYAND
AND
ACTUAL
RENTS
RISING
12%
$880
$860
10%
$840
8%
$820
$800
6%
$780
$760
4%
$740
2%
$720
Outlook
• Absorption is forecast to continue at a historically
impressive clip, and occupancy will remain stable over the
balance of 2014.
• Despite the delivery of a large volume of new product,
vacancy will remain lower than at any time since the
mid-1990s and will track in the mid-to-high 5% range.
• Expect to see piqued interest by out-of-state buyers who
seek to take advantage of higher returns than those found
in other gateway metros.
• The delivery and stabilization of new units will once again
garner interest from REITs and other institutional investors.
• Private capital buyers will remain both engaged and
focused upon Class A/B multi-family properties.
$700
0%
2010
2011
2012
Actual Rent, $/Unit
2013
2014
Overall Vacancy Rate
Sources: Pierce -Eislen , REIS, Cassidy Turley Research
Sources: Pierce-Eislen, REIS, Cassidy Turley Research
new supply
STRONG UNDERLYING FUNDAMENTALS ARE SPURRING DEVELOPMENT
STRONg UNDeRlYiNg FUNDAMeNTAlS ARe SPURRiNg DeVelOPMeNT
4000
3000
2000
Historic Average = 977 units
1000
0
-1000
-2000
’02 ’03 ’04 ’05 ’06 ’07 ’08 ’09 ’10 ’11 ’12 ’13 ’14 ’15 ’16 ’17
Sources: Pierce
-Eislen , REIS, Cassidy
Research
Sources:
Pierce-Eislen,
REIS,Turley
Cassidy
Turley Research
www.cassidyturley.com | 2
Indianapolis
Multi-Family Market Snapshot
Third Quarter • 2014
SURVEYED
PROPERTIES
SURVEYED
UNITS
High
ACTUAL RENTS
Low
Average
YOY %
CHG
CLASS A
AVG RENT
CLASS B
AVG RENT
CLASS C
AVG RENT
UNITS UNDER
CONSTRUCTION
$2,573
$510
$1,176
-2.3%
$1,441
$948
$520
1,328
Submarket
Downtown
36
4,920
East
43
7,215
$1,025
$379
$613
3.5%
n/a
$696
$616
0
Southeast
11
2,851
$1,280
$429
$790
3.4%
$894
$655
$600
0
South
35
7,675
$1,484
$379
$671
0.5%
$819
$797
$651
0
Southwest
West
7
1,477
$1,150
$472
$710
0.0%
n/a
$793
$605
260
56
16,515
$1,545
$325
$630
3.5%
$938
$739
$584
62
Northwest
38
10,569
$1,460
$380
$668
3.0%
$1,026
$691
$532
0
North
86
21,088
$1,798
$447
$760
1.3%
$1,125
$792
$505
197
Northeast
42
11,577
$1,240
$395
$667
2.7%
$956
$797
$621
200
Zionsville
Carmel
Fishers
Greenwood
6
1,308
$1,680
$767
$1,027
6.2%
$1,055
$1,034
n/a
398
21
4,853
$2,500
$699
$990
-0.4%
$1,199
$881
$758
317
9
3,696
$1,430
$709
$939
2.7%
$980
$861
n/a
967
25
5,610
$1,100
$499
$729
-1.6%
$814
$729
$649
0
INDIANAPOLIS Market ToTals
Class A
39
10,225
$2,500
$665
$1,033
-3.9%
Class B
195
52,484
$2,690
$429
$755
0.2%
Class C
181
36,645
$1,590
$325
$608
3.8%
415
99,354
$2,500
$699
$968
1.4%
TOTAL
Key Sale Transactions YTD
PROPERTY
UNITS
ADDRESS / CITY
BUYER / SELLER
SUBMARKET
Woodridge Apartments
576
2085 Waterford Place / Indianapolis
JVM Realty / Shamrock Properties IV
North
Waterside at Castleton
400
8380 Whipporwill Drive / Indianapolis
JVM Realty / Wilkinson JV BRT Realty Trust
Northeast
Meadowlark Apartments
360
9350 E. 43rd Street / Indianapolis
Domus Development / Meadowlark Indiana
Northeast
Wildwood
324
3491 Timbersedge Drive / Indianapolis
Onex Real Estate Partners / Fireside Financial
North
Harrison Place
307
5812 Beatle Drive / Indianapolis
JCap Management JV / Steadfast Apartment REIT
Northeast
Madison Park Village & Southgreen Apartments
223
4725 Madison Avenue / Indianapolis
Madison Park Indiana / Cross Road Holdings
South
Inverness Apartments
220
5810 Sebring Court / Indianapolis
Ocwen Financial Services / The Brauser Group
Northwest
Villa Paree
209
6111 Allisonville Road / Indianapolis
Muesing Mgmt. / EMK Property Investors
North
Eagle Creek
188
4061 Eagles Roost Drive / Indianapolis
Buckingham Co. / Pedcor Companies
Northwest
Quail Run
166
1380 Saylor Drive / Zionsville
Silver Co. JV McCann Realty / Buckingham Co.
Zionsville
Arrow Woods Apartments
153
7135 Warrior Trail / Indianapolis
Blue Valley Apartments / Term Security Corp.
West
Suncrest
140
1135 Suncress Circle / Indianapolis
JVM Realty / Hilltop Realty Advisors
West
Arbor Manor
108
212 Churchill Drive / Mooresville
Neff Rentals / Weichert Financial Relations
Outlying
Shadeland Court Apartments
100
3900 N. Shadeland Avenue / Indianapolis
Silver Property / L&J Investment Properties
Northeast
1349 Saddlebrook Court / Indianapolis
Fox Hill, LLC / Barrat Asset Management
North
Fox Hill Apartments
60
www.cassidyturley.com | 3
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Indianapolis
Multi-Family Market Snapshot
421
38
31
Third Quarter
Lebanon
•
32
2014
38
32
32
Noblesville
38
Pe
Multi-Family Submarkets
65
Indianapolis
69
31
ZIONSVILLE
39
52
Zionsville
865
Carmel
CARMEL
52
74
465
136
9
37
31
465
234
NORTHEAST
Meridian
Hills
37
NORTHWEST
Brownsburg
67
69
421
465
65
36
13
FISHERS
Fishers
421
267
Lawrence
NORTH
31
67
36
52
74
65
Indianapolis
70
36
267
9
IMS
465
anville
67
19
Avon
Speedway
74
36
70
EAST
DOWNTOWN
WEST
465
40
65
70
52
421
267
40
40
SOUTH
SOUTHWEST
Indianapolis
International
Airport
Plainfield
G
40
74
52
70
267
465
Beech Grove 40
74
52
67
31
36
9
SOUTHEAST
67
Southport
31
37
65
135
39
Mooresville
GREENWOOD
Greenwood
74
Fairland
42
About Cassidy Turley
144
Scott Pollom, CCIM
Cassidy Turley is a leading commercial real estate services provider with more than 4,000 professionals in
more than 60 offices nationwide. With headquarters in Washington, DC, the company represents a wide range
of clients—from small businesses to Fortune 500 companies, from local non-profits to major institutions. The
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144
firm completed transactions valued at $25.8 billion in 2013, manages
approximately
400 million square feet on
Whiteland
39
behalf
of institutional,
corporate and private clients and supports more than 24,000 domestic corporate
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65
services locations. Cassidy Turley serves
owners, investors and tenants with a full spectrum of integrated
37
commercial real estate services—including capital markets, tenant representation, corporate services, project
leasing, property management, project and development services, and research and consulting. Franklin
Please visit
www.cassidyturley.com for more information. Cassidy Turley announced in a press release on September 22
44
135
that it has entered into an agreement with an affiliate of DTZ Investment Holdings,
backed by TPG, PAG
Asia
Capital and Ontario Teachers’ Pension Plan (the Consortium that agreed to acquire DTZ), to sell 100% of the
44
equity interests of Cassidy Turley. The agreement is subject to customary closing conditions
and is dependent
Bud
on Cassidy Turley’s combination with the operations of DTZ Group (DTZ)
to create a global, full-service
commercial
real estate services company. The44Consortium’s acquisition of DTZ is currently scheduled to
Martinsville
close in early November 2014. The acquisition of Cassidy Turley is expected to close on December 31, 2014.
37
Senior Vice President, Principal
T 317.639.0403 | F 317.639.0504
Email: [email protected]
Jason W. Tolliver, J.D.
Shelbyville
Regional Vice President
T 317.639.0549 | F 317.639.0504
Email: [email protected]
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Cassidy Turley
One American Square, Suite 1300
Indianapolis, IN 46282
The information contained within this report is
gathered from multiple sources considered to be
reliable. The information may contain errors or
omissions and is presented without any warranty or
representations as to its accuracy. Copyright © 2014
Cassidy Turley. All rights reserved.
www.cassidyturley.com | 4
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