Multifamily Market Snapshot (2 Q12)

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Multifamily Market Snapshot (2 Q12)

  1. 1. MultifamilyMarketSnapshotIndianapolis, IndianaSecond Quarter 2012
  2. 2. Multifamily Market Snapshot Indianapolis • Second Quarter • 2012 Market Tracker Vacancy Qtr. Absorption YTD Net Absorption Q2 Construction *Arrows indicate YOY trend 5.6% 484 Units 1,319 Units 32 Units Overview Over the course of the last two years, multifamily has emerged as the strongest commercial property type in terms of overall demand (both renters and buyers) and asset appreciation. Given the backdrop of a sluggish economy—where real GDP grew a meager 1.5% in the second quarter of 2012—the statistics in the multifamily sector continue to reveal a return to sound fundamentals. The Indianapolis multifamily sector remains in reasonable growth mode with 1,319 net absorbed units through midyear.Indianapolis multifamily Correspondingly, multifamily vacancy rates currently register 5.6%, their lowest level in more 2Q12 2Q11 than a decade. Despite the fact that 5.0% vacancy is typically the threshold for rent growth, Tracked Inventory (Units) 110,858 110,187 rents in the Class A sector have grown unabated in the greater Indianapolis market for eight Asking Rent Growth 0.8% 0.5% consecutive quarters. According to REIS, Inc., during the second quarter of 2012, average Vacancy Rates 5.6% 6.9% asking rents for Class A assets increased by 0.8% to $702. Meanwhile, effective rents Qtr. Absorption (Units) 484 882 increased by 1.2% to $668—the highest level on record. Promisingly for owners and YTD Net Absorption (Units) 1,319 1,633 investors, we anticipate rents to grow at a steady pace through the remainder of 2012 in Construction (Units) 32 333 Indianapolis and most surrounding zip codes as vacancy remains level across the market. Source: Reis, Inc. Strong demand metrics continue to drive development in the multifamily segment around Indianapolis. Developers are slated to bring in excess of 2,000 units online in 2012, an increase ofVacancy RateVacancy more than 100% over 2011 deliveries. We anticipate more than enough demand for this new12% Historical Average product. Due in part to the inherent challenges of a tumultuous economy, as well as the pervasive10% uncertainty that permeates the market, there continues to be a larger number of former 8% homeowners entering and staying in the rental market. Demographics also point to the same trend. 6% According to current population survey data, household formation growth is returning to the norm 4% and this in turn will create a new wave of renters. It is also worth noting that “echo boomers”— 2% those born in 1986 or later—are now entering their prime rental years. Both factors suggest there 0% will be a steady flow of demand feeding the Indianapolis multifamily sector for many years to come. 2007 2008 2009 2010 2011 2012 Source: Cassidy Turley Research ForecastNetAbsorptionNet Absorption • xpect renter demand to remain brisk as economic and demographic shifts in the market E 3,600 remain promising for multifamily. Stringent loan requirements will continue to serve as a 3,100 hindrance for some prospective first-time single-family homebuyers, while household 2,600 2,100 formation among the 18- to 34-year-old population will continue to increase. 1,600Units (#) 1,100 • bsorption is forecast to continue at a historically impressive clip, and occupancy will A 600 100 remain stable over the balance of 2012. Vacancy is expected to decline through the -400 -900 forecast horizon of 2012–16 and should track below 5.5% by 2013. -1,400 • sking and effective rents will continue to grow. REIS, Inc. estimates that asking rents will rise A 06 07 08 09 10 11 12 20 20 20 20 20 20 20 4.2% in 2012, while effective rents will increase 5.9%. Rent growth is forecast to be greater Source: Cassidy Turley Research through the period 2012–16 than during any five-year period of the last two decades. • xpect to see piqued interest by out-of-state buyers in the Indianapolis multifamily market who E seek to take advantage of higher returns than those found in other gateway metros. Additionally, the delivery and stabilization of many new units will likely garner interest from REITs and other institutional investors. Meanwhile, private capital buyers, especially those who have been sitting on the sidelines since 2008, will remain both engaged and focused upon Class B/C properties. www.cassidyturley.com
  3. 3. Cassidy Turley Multifamily Market Snapshot: YTD 2012 Notable Greater Indianapolis Multifamily Investment SalesIndianapolis Area • Second Quarter • 2012 Property Name Address City Units Hillcrest Woods 6201 Newberry Rd. Indianapolis 384 Emerson Village 5325 Emerson Ave. Indianapolis 352 Stone Ridge Apartments* 7111 Vedder Place Indianapolis 320 Brockton Apartments Townhomes 5778 Brockton Dr. Indianapolis 284 Gladden Farms I II 311 Country Ln. Plainfield 220 Vineyard at Apple Creek Apartments* 10101 Montery Rd. Indianapolis 198 Oak Lake at Crooked Creek 3885 Oak Lake Cir. Indianapolis 192 Autumn Trails 7975 Red Mill Dr. Indianapolis 164 Garden of Greenbriar 1344 Vibunum Dr. Indianapolis 121 Cold Springs Manor 2638 Cold Springs Manor Dr. Indianapolis 109 Willow Brook Apartments* 2111 East 52nd St. Indianapolis 51 Ritter Manor Appartments* 2302 Ritter Ave. Indianapolis 42 Meadow Drive Apartments* 268 Meadow Dr. Greenwood 12Source: Real Capital Analytics, Cassidy Turley Research*Cassidy Turley brokered transactionsCassidy Turley Multifamily Market Snapshot: Market DataIndianapolis Area • Second Quarter • 2012 VACANCY NET ASKING INVENTORY VACANT VACANCY CHANGE OCCUPIED ABSORPTION ASKING RENT YEAR (UNITS) (UNITS) RATE (BPS) (UNITS) (UNITS) RENTS CHANGE 2006 106,343 9,760 9.2% 60 96,583 1,386 $639 0.9% 2007 106,665 8,818 8.3% 90 97,847 1,264 $663 3.7% 2008 106,926 8,323 7.8% 50 98,603 756 $676 1.9% 2009 108,000 10,901 10.1% -230 97,379 -1,224 $670 -0.8% 2010 109,704 8,813 8.0% 210 100,891 3,512 $682 1.8% 2011 110,826 6,690 6.0% 200 104,136 3,245 $696 2.1% 2012 (Q2) 110,858 6,238 5.6% 40 104,620 484 $702 0.8% 2013(f) 114,449 5,363 4.7% 90 109,086 2,312 $757 4.3% 2014(f) 116,403 5,465 4.7% 0 110,938 1,852 $790 4.4%(f): ForecastSource: Reis Inc., Cassidy Turley ResearchCassidy Turley Multifamily Market Snapshot: Demographic DriversIndianapolis Area • Second Quarter • 2012 AVERAGE HH TOTAL OFFICE INDUSTRIAL YEAR POPULATION HOUSEHOLDS INCOME EMPLOYMENT EMPLOYMENT EMPLOYMENT 2006 1,682,620 653,950 $98,984 907,770 267,181 157,448 2007 1,707,230 663,210 $100,517 921,030 274,272 155,167 2008 1,730,450 671,880 $101,780 904,130 269,659 150,836 2009 1,752,390 679,940 $98,095 865,370 260,768 136,818 2010 1,771,840 687,800 $98,503 875,200 265,108 136,088 2011 1,794,950 697,160 $101,610 882,600 268,125 135,718 2012 1,801,480 700,130 $102,082 885,890 269,205 136,111 2013(f) 1,844,810 720,030 $108,163 904,750 276,830 138,089 2014(f) 1,868,010 730,890 $113,938 929,610 285,752 140,205(f): ForecastSource: Reis Inc., Cassidy Turley Research www.cassidyturley.com
  4. 4. multifamily Average Unit size Comparisons multifamily Asking Rent ComparisonsIndianapolis Area • Second Quarter • 2012 Indianapolis Area • Second Quarter • 2012 Multifamily Average Unit Size Comparisons Multifamily Asking Rent Comparisons 1,500 $1,500 1,000 Square Feet $1,000 500 $500 0 $0 Studio 1 BR 2 BR 3 BR Studio 1 BR 2 BR 3 BR Indianapolis $444 $609 $746 $911 Indianapolis Midwest United States Midwest $835 $834 $991 $1,272 United States $1,073 $1,064 $1,266 $1,461Source: Reis Inc., Cassidy Turley Research Source: Reis Inc., Cassidy Turley Researchmultifamily Asking Rent per sf Comparisons multifamily Asking Rent Growth DistributionIndianapolis Area • Second Quarter • 2012 Indianapolis Area • Second Quarter • 2012 Multifamily Asking Rent Per SF Comparisons Multifamily Asking Rent Growth Distribution $2.00 200 160 Number of Properties $1.50 120 179 Properties 269 Properties Negative Growth Positive Growth 80 $1.00 40 $0.50 0 Studio 1 BR 2 BR 3 BR Under (5.1%) to (3.4%) to (1.7%) to 0.0% to 1.7% to 3.4% to 5.1% Indianapolis $1.00 $0.86 $0.74 $0.70 (5.2%) (3.5%) (1.8%) (0.1%) 1.6% 3.3% 5.0% Over Midwest $1.57 $1.08 $0.90 $0.88 United States $1.96 $1.34 $1.13 $1.03Source: Reis Inc., Cassidy Turley Research Source: Reis Inc., Cassidy Turley Research Contact Information scott pollom, CCIm Principal, Senior Vice President Investment Services 317.639.0403 Scott.Pollom@cassidyturley.com Jason W. Tolliver, J.D. Research DirectorAbout Cassidy Turley Research ServicesCassidy Turley is a leading commercial real estate services provider with more than 3,600 professionals in more 317.639.0549than 60 offices nationwide. The company represents a wide range of clients—from small businesses to Fortune Jason.Tolliver@cassidyturley.com500 companies, from local non-profits to major institutions. The firm completed transactions valued at $22 billion The information contained within thisin 2011, manages 455 million square feet on behalf of institutional, corporate and private clients and supports report is gathered from multiple sources considered to be reliable. The informationmore than 28,000 domestic corporate services locations. Cassidy Turley serves owners, investors and tenants with may contain errors or omissions anda full spectrum of integrated commercial real estate services—including capital markets, tenant representation, is presented without any warranty orcorporate services, project leasing, property management, project and development services, and research and representations as to its accuracy.consulting. Cassidy Turley enhances its global service delivery outside of North America through a partnership with Copyright © 2012 Cassidy Turley.GVA, giving clients access to commercial real estate professionals in 65 international markets. Please visit All rights reserved.www.cassidyturley.com for more information about Cassidy Turley. www.cassidyturley.com

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