Raleigh

Highlights:

• Conditions in the Raleigh-Durham multifamily market continued to cool during the last few months of the year, as vacancy trended higher, and asking rents fell. Multifamily developers remain extremely active throughout the region.
• The local vacancy rate continued to push higher during the fourth quarter, rising 50 basis points in the last three months to 5.8 percent. In 2022, the rate rose 160 basis points, after tightening by a similar figure in the previous year.
• Asking rents dropped 2 percent during the fourth quarter to $1,571 per month. Despite a modest decline at the end of the year, asking rents advanced 6.3 percent in 2022 and are forecast to inch higher in the year ahead.
• Multifamily sales activity slowed during the fourth quarter, reaching its lowest level of activity in more than two years. The median sales price in 2022 was $240,400 per unit, up 22 percent from the median price in 2021.

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David Vinson
Senior Vice President - Managing Director

CHARLOTTE, NORTH CAROLINA (February 7, 2023) – Northmarq announces the promotion of David Vinson to managing director of its Charlotte/Raleigh debt and equity offices. Vinson will oversee the daily operations of the offices while continuing to serve Northmarq’s clients as an active deal team member arranging debt and equity financing.

Vinson joined Northmarq in 2013. He brings over 15 years of capital markets experience, during which he has completed more than $1.5 billion in transaction volume. Prior to joining Northmarq’s Raleigh office, Vinson spent seven years in Charlotte, North Carolina, working for Berkeley Capital Advisors and Wachovia/Wells Fargo. Vinson received his B.S. degree in Finance from the Walker College of Business at Appalachian State University.

Highlights:

• Property fundamentals in the Raleigh-Durham multifamily market softened somewhat during the third quarter, with vacancies rising as the pace of construction accelerated. Demand drivers remain strong, suggesting absorption should gain momentum in the coming quarters.
• Vacancy in Raleigh-Durham pushed higher in recent months, rising 20 basis points during the third quarter to 5.3 percent. Year over year, the rate is up 180 basis points. Prior to recent increases, the local vacancy rate had been trimmed nearly in half from 2020 to mid-2021.
• Year over year, asking rents have jumped 9.3 percent, ending the third quarter at $1,603 per month. Since the beginning of 2021, local asking rents have spiked more than 30 percent.
• Total transaction activity in the third quarter was nearly identical to levels recorded in the second quarter. Prices have increased, as the median sales price reached $264,800 per unit, up 32 percent from 2021 levels.

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Highlights:

• Strong demand drivers are fueling the Raleigh-Durham multifamily market. Rents and sales prices continue to push higher at rapid paces, even as vacancy has trended higher.
• Vacancy rose 20 basis points to 5.1 percent in the second quarter. This was the third consecutive quarter where vacancy trended higher, following three straight quarters where the rate tightened. The current vacancy rate is still lower than the market’s long-term average.
• Rents in Raleigh-Durham continued to rise at a rapid pace in the second quarter. Asking rents reached $1,626 per month at midyear, up 16.8 percent year over year. Some of the strongest rent growth was recorded in the past few months; rents rose 5.9 percent in the second uarter alone.
• Sales velocity during the second quarter accelerated from levels at the beginning of the year, and prices rose. Transaction counts in the first half are up nearly 30 percent from the same period in 2021. The median price year to date has reached approximately $243,500 per unit, 21 percent higher than the median price in 2021.

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Highlights:

• Following a year when completions were down 50 percent from the market’s long-term average, apartment construction gained momentum in Raleigh-Durham during the first quarter of 2022. The increase in deliveries pushed the vacancy rate higher, although the region’s rapid job growth should cause absorption to gain momentum in the coming quarters. Rents have continued to trend higher at a rapid pace.
• Vacancy reached 4.9 percent during the first quarter, rising 70 basis points from the end of 2021. Despite the recent increase, the current figure is still 50 basis points lower than the rate one year earlier.
• Area asking rents rose 3.9 percent in the first quarter and have increased by 21.6 percent year over year, reaching $1,536 per month.
• The pace of sales to start 2022 increased compared to levels from one year earlier. Sales were concentrated in larger deals with newer properties, pushing the median price to $243,500 per unit. Properties that traded in the first quarter generally had cap rates between 3.5 percent and 4 percent.

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Highlights:

• The Raleigh-Durham multifamily market gained momentum in 2021, with rents posting sizable gains and vacancy dipping to the low-4 percent range. With property fundamentals improving, investment activity surged, particularly in the second half of the year.
• Apartment vacancy trended lower through the first three quarters of 2021 before rising 70 basis points in the fourth quarter. The rate ended the year at 4.2 percent, tightening by 170 basis points in 2021.
• Rents climbed more than $250 per month in 2021, although the pace of increases cooled in the fourth quarter. Asking rents rose 20.7 percent in 2021, ending the year at $1,478 per month. Additional increases are likely in 2022, although the pace of growth will be more modest.
• The investment market remained active during the fourth quarter, with sales activity matching levels from the previous quarter. The median price for the year was $200,500 per unit, nearly identical to the median price in 2020. The median price rose late in the year; in transactions during the fourth quarter, the median price reached $228,000 per unit while cap rates compressed to 3.6 percent.

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Highlights:

• Heightened absorption of apartment units in Raleigh-Durham is fueling the local multifamily market, with vacancies tightening and rents spiking. The surging property fundamentals have fueled the investment market in recent quarters, with very rapid activity recorded during the third quarter.
• Vacancy fell 130 basis points to 3.5 percent during the third quarter. Year over year, the rate has declined 210 basis points. Vacancy has nearly been trimmed in half after largely holding steady at around 6 percent in recent years.
• Tightening vacancy and a rapid pace of absorption have driven significant spikes in rents. Year over year, asking rents are up 19.5 percent at $1,467 per month.
• The investment market gained momentum during the third quarter, with sales outpacing the total for the entire first half of the year. Year to date, the median price is approximately $176,700 per unit, although in recent transactions the median price topped $212,000 per unit. Cap rates have averaged 3.9 percent.

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Report identifies new markets, market drivers, and investment opportunities

MINNEAPOLIS (Oct. 15, 2021) – Northmarq, which is an industry leader in the growing build-to-rent market, has issued its Oct. 2021 special report, authored by the company’s national Build-to-Rent team and Research Director Pete O’Neil. Led by Jeff Erxleben, executive vice president/executive managing director, and Trevor Koskovich, president-Investment Sales, the group of 12 experts in debt, equity, and investment sales, has completed more than $1.5 billion in single-family built-to-rent sales transactions in the U.S. and has over 15 active listings and assignments.

“While this property type first appeared in Phoenix, we are now seeing activity across the country and built a team focused on the asset from start to finish. By combining financing and sales experts on the same team, we can provide the best insights to clients across the country,” said Koskovich.

As part of the specialty practice group’s responsibilities, they work with Northmarq’s Director of Research Pete O’Neil to compile a research report twice a year. The second half report, issued today, identifies three key trends:

1. Financing continues to be more plentiful for investors in this market. Early in the development cycle, institutional and GSE lenders stayed away from this product, primarily because it was viewed as disjointed single-family homes rented without strong oversight. With the explosion of interest in the product, BTR communities consistently have a master-planned development of single-family homes for rent, often with significant amenities comparable to traditional multifamily.
   
2. New markets appear in the development pipeline monthly, with recent growth in the Carolinas and Dallas-Fort Worth. In DFW, 25 projects are underway, slated to deliver more than 3,000 homes in the next 18 months. In Charlotte, nearly two dozen projects totaling more than 2,800 units are either under construction or in the planning phases in the Charlotte metro area.
   
3. Renter demand drives this product, as occupancy nears 100 percent in almost every community. This demand is coming from older renters looking for flexibility to younger families looking for more space than a traditional apartment. For both types of tenants, the increasing costs related to owning are making leasing increasingly attractive.
   “More and more traditional multifamily lenders, including the GSEs, life insurance companies, traditional banks and private debt funds, are financing these properties. We’ve seen debt providers offering more attractive terms as this market expands and the competition from lenders trying to gain traction,” said Erxleben.

Billions of dollars of debt and equity capital are moving into this investment class with new entrants on the scene seemingly monthly. Lenders recognize build-to-rent’s impressive fundamentals and are offering developers and investors new options for structuring their financing. What was a niche product in only a handful of markets a couple of years ago is spreading across some of the fastest-growing areas of the U.S., particularly the Southwest, Texas, and the Southeast.

See Northmarq’s report here.

Jeffrey Erxleben
President - Debt & Equity

Billions of dollars of debt and equity capital are charging into this investment class

MINNEAPOLIS, MINNESOTA (October 8, 2021) – Developers, investors, renters, and now lenders, are catching the wave of single-family build-to-rent, one of the hottest sectors in the U.S. multifamily housing market. Read the full report.

If build-to-rent isn’t in your market yet, it’s likely heading your way.
Northmarq is very active in this thriving space having launched in 2021 a National Build-to-Rent practice group comprised of dedicated debt, equity, and investment sales experts from across the country. Northmarq has already completed more than $1.5 billion in single-family home rental transactions in the U.S. and has over 15 active listings and assignments.

Billions of dollars of debt and equity capital are moving into this investment class with new entrants on the scene seemingly monthly. Lenders recognize build-to-rent’s impressive fundamentals and are offering developers and investors new options for structuring their financing. What was a niche product in only a handful of markets a couple of years ago is spreading across some of the fastest-growing areas of the U.S., particularly the Southwest, Texas, and the Southeast.

Strong demand from renters is fueling the expansion. Additionally, one of the biggest advancements of build-to-rent product is developers are creating purposeful neighborhoods of rental homes operated by the same multifamily management operator. This allows the owner to operate cost-efficiently when managing the rental and maintenance of the homes, which is more attractive to investors than portfolios of traditional single-family rentals that could be scattered across metros, submarkets, and regions.

Numerous debt financing options available for development, acquisitions
As build-to-rent velocity accelerates, investors and lenders are becoming more familiar and comfortable with the product. More and more traditional multifamily lenders are financing these properties. Lenders range from Freddie Mac, Fannie Mae, and life insurance companies, traditional banks, and private debt funds seeking to expand their portfolios. Debt providers are becoming wider and deeper as build-to-rent expands. Terms are attractive, with lenders willing to increase the loan-to-cost amounts at lower interest rates. Lender competition is heating up with lenders seeking to gain traction within the property type.

For acquisition and recapitalization, Fannie Mae and Freddie Mac are very active debt options in the space. Northmarq, as a direct Freddie and Fannie lender, is one of the largest direct agency lenders currently making these loans. We recently completed the sale of two projects with more than 500 units in Phoenix and simultaneously arranged acquisition financing through Northmarq’s Fannie Mae platform.

Equity pours into the sector
More than $10 billion in equity capital is expected to move into build-to-rent properties this year alone, after roughly a dozen institutions announced plans to expand into the sector. For example, Blackstone announced a $6 billion acquisition of Home Partners of America, and Invesco Real Estate partnered with Mynd Management, committing $5 billion to purchase 20,000 single-family homes.

Investor response has been robust. More than $900 million in build-to-rent transactions closed in 2020, up from $400 million in 2019. Transaction activity continues to accelerate in 2021. The number of properties that sold during the first half of was nearly identical to the total sold in all of 2020.

A strong second half is underway with several properties slated to close by year-end. Similar to conventional multifamily, pricing is pushing higher and cap rates have compressed. The median price surpassed $250,000 per unit in 2020, while the median price in transactions closed year to date exceeds $300,000 per unit. Robust investor demand and increasing rents are driving up pricing.

Why is build-to-rent popular with renters?
Build-to-rent provides renters new options fueled by its affordability, flexibility, and as an alternative to the tight housing market. Millennials are a big force behind the build-to-rent movement, as they move to the suburbs seeking more space, yet still opt to rent. They’re looking for modern amenities that new build-to-rent communities offer. Empty nesters are also attracted to this rental option. Hot markets include Phoenix; Texas, led by Dallas-Fort Worth and Austin; and the Southeast including Orlando and Tampa, Fla., Atlanta; and the Carolinas.

Dallas-Fort Worth and the Carolinas, in particular, are up-and-coming markets to watch. Buoyed by booming job markets, fast-growing populations, and increasing housing prices, Dallas-Fort Worth and North and South Carolina are becoming top spots for new build-to-rent communities.

The product is still in its early stages in Dallas-Fort Worth with approximately a dozen build-to-rent properties delivered since 2018. However, activity is accelerating rapidly, with another roughly 25 projects under construction or planned, totaling more than 3,100 units.

There are roughly 25 existing build-to-rent communities across the Carolinas with several more projects in the pipeline, which should deliver in the next few years. Thriving build-to-rent cities include Charlotte and Greenville, S.C., and Raleigh-Durham and Myrtle Beach, N.C.

Highlights:

• The second quarter was a particularly strong period of multifamily property performance in the Raleigh-Durham area. Area vacancy rates tightened dramatically, and rents surged higher. Investment activity gained momentum. Additional improvement is anticipated in the second half of the year.
• Vacancy fell 60 basis points during the second quarter, reaching 4.8 percent. Year over year, the rate has improved by 110 basis points.
• Strong renter demand and tightening vacancy levels resulted in a spike in area rents. Asking rents ended the second quarter at $1,392 per month, 13.3 percent higher than one year earlier. Rents rose 10 percent during the second quarter.
• Transaction activity doubled from the first quarter to the second quarter, reflecting the current demand in the market. The median price through the first half of the year was approximately $161,300 per unit, and cap rates have compressed to an average of 3.9 percent.

Read the report

Highlights:

• Multifamily fundamentals in Raleigh-Durham got off to a strong start at the beginning of the year. As the pace of deliveries slowed, rents spiked and vacancy tightened.
• Apartment vacancy declined 50 basis points in the first quarter of 2021, falling to 8.5 percent. Additional tightening is expected in the coming quarters.
• After advancing 1.3 percent in 2020, rents surged in the first quarter. Local asking rents increased 3.1 percent from the fourth quarter reaching $1,263 per month.
• Following an extremely active year in 2020, sales velocity slowed at the start of 2021. In sales that closed during the first quarter, the median price was $157,600 per unit, while cap rates averaged 4.6 percent.

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Andrea Howard
Managing Director

Allan Lynch
Managing Director

Jeff Glenn
Managing Director

MINNEAPOLIS, MINNESOTA (Feb. 4, 2021) – One of the top nationally ranked multifamily investment sales teams has joined NorthMarq’s Charlotte and Raleigh offices, bringing the company’s investment sales locations to 18. Andrea Howard, Jeff Glenn, John Currin, Allan Lynch, and Caylor Mark, previously with JLL, will market multifamily investment properties primarily in the Carolinas.

“We are incredibly excited to welcome Andrea, Jeff, Allan, John, and Caylor to NorthMarq, as they are well-known and highly regarded in institutional capital markets,” said Trevor Koskovich, president-NorthMarq’s Investment Sales business. “From inception, our business model was to find innovative brokers who fit our culture and could leverage our debt & equity business. We are confident the Carolina team will be an excellent addition to our platform, rounding out our coverage throughout the southern half of the U.S.”

The teammates were previously competitors, but in 2019 came together as one team, creating a market-leading powerhouse with more than $20 billion in combined transaction volume. Their experience encompasses investment sales of class A and B multifamily assets, land sales, and development advisory, where their experience in pre-stabilized space has dominated the Carolinas recently. 

“What’s unique about us is the level of trust we’ve developed so quickly. That trust translates into great teamwork to support our clients. By aligning with NorthMarq’s growth, we can leverage that platform to benefit clients even more,” said Howard, managing director – investment sales, who brings her 20-plus years and more than $5.5 billion of multifamily investment transaction experience to the growing NorthMarq Investment Sales platform. She spent the first half of her career on the acquisition side of the business working for three different institutional investors.

Glenn will be managing director in Raleigh, where he will continue his more than 20-year career advising private, public and institutional investors in the disposition, acquisition and structuring of over $5.5 billion of large scale investment property. Lynch, also managing director, has nearly 20 years of experience and a diverse transaction history totaling more than $15 billion, which includes more than $7 billion in multifamily..

Currin spent over five years at JLL and was previously with two southeast development and acquisitions firms, having nearly $5 billion in transaction volume. Mark has eight years of multifamily investment sales experience with more than $5.4B of multi-housing transactions across the southeast, along with four years working in office and retail leasing. They join NorthMarq as senior vice president-investment sales. In business since 1960, NorthMarq has grown to more than 650 employees through more than 20 acquisitions, nearly $65 billion loan servicing portfolio and access to hundreds of capital sources, including Fannie Mae DUS, Freddie Mac, and FHA/HUD platforms and nearly 100 life company relationships.

RALEIGH, NORTH CAROLINA (January 12, 2019) – NorthMarq’s Raleigh-based regional office announced the addition of a new vice president, Nathan Griffith, to its office staff. At NorthMarq, Griffith will focus on the organization, structuring, placement and closing of debt and equity financing with life insurance companies, CMBS lenders, agency lenders, commercial banks and credit unions.

“I am very excited to leverage NorthMarq’s extensive lending platform to the benefit of current and future clients,” said Griffith. “Ranging from hospitality to multifamily, and everything in between, NorthMarq has financing solutions for all property types and asset classes.”

Prior to joining NorthMarq, Nathan spent three years on Concord Hospitality’s business development team where he focused on expanding Concord’s portfolio through acquisition, development, and third-party management. While at Concord, Nathan led the company’s underwriting and market analysis efforts, and was able to directly assist in the expansion of the portfolio by 30+ hotels.

“We’re excited to have Nate on board to help grow our platform here in the Carolinas,” said Todd Crouse, senior vice president/managing director of NorthMarq’s Raleigh-based regional office.

Nathan received his B.S. degree in Finance from Iowa State University in 2014. He is also a licensed real estate broker in North Carolina and a member of Urban Land Institute.

Dave Stewart joined four other NorthMarq Capital producers to discuss and answer questions regarding tertiary and secondary markets. In his responses he noted that “Multifamily is of course the hot property type in Charlotte as well as growth areas of the southeast. Most news headlines are focused on the class “A”/Dog Wash/Rooftop pool/urban infill structures, but there is a huge market for class “B” and workforce housing in the areas surrounding major metropolitans. It is estimated that over 150 people are moving to the Charlotte MSA per day.” Read Dave’s responses below.

1.  What property type/niche are seeing/hearing about in your market? What conditions make this possible?
Multifamily is of course the hot property type in Charlotte as well as growth areas of the southeast. Most news headlines are focused on the class “A”/Dog Wash/Rooftop pool/urban infill structures but there is a huge market for class “B” and workforce housing in the areas surrounding major metropolitans. It is estimated that over 150 people are moving to the Charlotte MSA per day. Not all can pay $2.00 PSF rents so they live in nice communities in the suburbs and commute. The values for these garden-style complexes has increased at a rapid pace in the past two-to-three years and their owners now have significant capital to deploy.

2. What type of borrowers/lenders are in your market? For example; is it primarily agency or are bank and life companies also part of the mix? Why?
Borrowers in our market are accustomed to bank loans. The personal guarantee is an annoyance but not always a deal killer. Banks have been our primary competition. Life companies seem to provide the sweet spot in terms of decent leverage, non-recourse and ease of execution so many are flocking to this financing type.

3. What are the unique challenges facing your market?
There have been some political decisions that have affected development projects but it doesn’t appear that it has bled into the acquisition side. There is some cause for concern with oversupply of apartments and office; and although the demand may lag for now, the economics will soon catch up.

4. What are the unique opportunities present in your market?
Those familiar with our market and have experience investing here know when and where to pick their spots. It is nice to reward clients that have been investing in this community for a long time with lenders who are actively seeking their deals. The Southeast, in particularly Charlotte, is a hot bed of activity and should continue to be for quite some time.

Read the full story here.