In our examination of multi-family sales of greater than five units over the course of 2016 we have some interesting data to share. Several downward trends emerged over the third and fourth quarter including a decrease in activity, rise in vacancy and a widening gap from asking to sales price. There was a precipitous decline in sales price per unit along with a mostly steady trend in time to market with the exception of the larger properties. Taken individually these statistics may seem to indicate a downturn in the multi-family market, but upon closer examination we feel that Omaha’s market will remain an attractive investment opportunity for the upcoming year.
In a sample of 35 sales taken from CoStar, 60% of sales took place in the first and second quarter. As to the value of the assets sold, of the $101 million in transactions that took place in 2016, more than $75 million was finalized by mid year. The total sales figure lags behind 2015 by nearly $20 million and represents the first decline in overall sales since 2009.
of the $101 million in transactions...$75 million was finalized by mid year
The rise in vacancy was only a single point and was accompanied by a bump in the reported rental rates. Vacancy rates have stayed consistent over the past four years and are still below 6% for the market.
Although the first quarter of 2016 has showed us the first sales above asking price trend in over a decade, it has also given the market it’s widest negative margin since 2011. In sales to asking price differential, the fall began in the first quarter, bottoming out in the third, to rest in its current state of 10% below asking for finalized transactions.
At first blush this may all seem an alarming trend but the facts are that the premium properties were sold in the first half of the year while the remainder of the B and C class properties that remain have lingered on the market. This fact alone demonstrates the power of a small group of larger properties to impact a tertiary market like Omaha. The class A properties quite simply command higher asking price and price per unit. With the limited availability of premium offerings, the remainder of the market consists mostly of B and C class units that are generally in a lack of repair or require modernization at the minimum. The best properties are still commanding top rents, and sales price, while the rest of the pack is falling further behind.
While new construction of apartments continues on a blistering pace with the last two years only time will tell if Omaha’s growth can accommodate the supply of newer, high end apartment living available to its residents.
By Jim Sanderson & Justin Brown