All Eyes on 2021 WEST MICHIGAN MULTIFAMILY RESEARCH & FORECAST REPORT | Q1 2021 - WOODTV.com
←
→
Page content transcription
If your browser does not render page correctly, please read the page content below
All Eyes on 2021 WEST MICHIGAN MULTIFAMILY RESEARCH & FORECAST REPORT | Q1 2021
SUPPLY & DEMAND
SUPPLY AND DEMAND
The Grand Rapids market continues to SUPPLY AND DEMAND
be in dire need of new development.
Effective Rent Growth
3,000 10%
Inventory grew 1.3%, which is 50 bps
Units Absorbed
2,000
lower than the national growth of 5%
1.8%. 78.9% of apartment inventory 1,000
in Grand Rapids is over 20 years old. 0 0%
We have seen a decent increase in the
2015 2016 2017 2018 2019 2020
past 5 years, as this new inventory
DEMOGRAPHICS now accounts for 8.3%, however Annual Completions (Units) Absorption (Units) Effective Rent Growth
STATISTICS Kent County alone is projected to
need an additional 5,000 rental units CONSTRUCTION
CONSTRUCTIONSTARTS
STARTS
in the next 5 years to keep up with 400
the projected 4% population growth.
The increasing cost of construction 300
1,080,710
Millions ($)
is limiting new development as
200
OVERVIEW & TOTAL POPULATION
construction inflation has averaged
5.5% over the past five years. New 100
deliveries will more than likely
DEMOGRAPHICS take longer to fill until the economy
recovers, as demand for high-cost
0
4Q17 1Q18 2Q18 3Q18 4Q18 1Q19 2Q19 3Q19 4Q19 1Q20 2Q20 3Q20
MARKET SUMMARY living has declined.
As we roll into 2021, we look at a year in review of a tumultuous, bifurcated 2020. The Grand 0.56%
POPULATION GROWTH (YOY)
CONSTRUCTION
CONSTRUCTIONCOMPLETIONS
COMPLETIONS
250
Rapids market has largely been known as a low beta market compared to the multifamily
market in the US, and it continued to prove such in 2020. The Grand Rapids market was the 200
12th strongest market for rent growth, with a YoY increase of 4.76%, and a 5 year average FEATURED PROPERTIES
Millions ($)
150
of 4.32%. Nationally, rent growth fell -0.8% in 2020, however, there was a large variation Not Actual Property 100
between metros as high-gateway markets like San Francisco (-9.4%) struggled the most while
the Midwest, Sunbelt, Southwest, and Mid-Atlantic regions saw modest growth. The pandemic
accelerated the trend of Millennials beginning to settle down and buy houses in suburban 4.16%
5 YEAR POPULATION FORECAST
50
0
markets as well as accelerating the work-from-home trend that many have come to know and 3Q19 4Q19 1Q20 2Q20 3Q20 4Q20 1Q21 2Q21 3Q21 4Q21 1Q22 2Q22 3Q33
love & vice versa. Close to 10 months into the largest global pandemic and economic disruption,
the economy reflects much of the same story as the rental market - the economy is bifurcated.
Weekly jobless claims remain elevated as new unemployment claims have topped the 2009 MEADOWBROOKE
Grand Rapids, MI MARKETCOMPOSITION
MARKET COMPOSITIONBYBYASSET
ASSET CLASS
CLASS
peak every week since March while on the other hand, the equity markets are continuing to 492 Units
-8.73%
reach all time highs. Ed Rose & Sons 1.5% 1.8% Discretionary (A+, A)
14.2%
Q4 2020 12 MONTH CHANGE 5 YEAR AVERAGE JOB GROWTH (YOY) Upper Mid-Range (A-, B+)
Total Inventory 65,890 871 units 63,307 Low Mid-Range (B, B-)
44.3%
Absorption 1,167 459 1,209 Workforce - Upper (C+, C)
Completions 915 167 1,064 38.3%
Workforce - Lower (C-, D)
$61,947
Occupancy 97.71% 1.09% 96.61%
Effective Rent $1,046 $72 $906
SOURCE: YARDI MATRIX, TEXAS A&M REAL ESTATE CENTER
Effective Rent Growth 4.76% 0.77% 4.32% MEDIAN HOUSEHOLD INCOME RED CEDAR
Lansing, MI
416 Units
RENT &
& OCCUPANCY PROJECTED COMPLETIONS AS % OF PRIOR INVENTORY
RENT OCCUPANCY TRENDS
TRENDS Red Cedar Development # OF
RANK DEVELOPER VALUE PROPERTIES
98.0% $1,100
1 Continental Real Estate $199,999,950 4
97.0% $1,000
36.7
MEDIAN AGE
2
3
Continental Properties
Edward Rose & Sons
$100,000,000
$63,000,000
2
1
96.0% $900
4 Waypoint Real Estate Investments $52,000,000 1
95.0% $800 5 Thompson Thrift $48,493,810 1
6 Magnus Capital Partners $35,000,000 1
94.0% $700 CITYLINE APARTMENTS
2Q20
4Q20
3Q20
1Q20
2Q16
4Q16
2Q18
4Q18
4Q15
2Q19
4Q19
3Q16
3Q18
2Q17
4Q17
3Q19
3Q17
1Q16
1Q18
1Q19
1Q17
Grand Rapids, MI 7 Richland Communities $30,800,000 1
93.0% $600 27.08%
RENTER
240 Units
Herman & Kittle Prop. Inc.
8
9
Herman & Kittle Props
Trilogy Healthcare Services
$25,000,000
$23,000,000
1
2
Occupancy Effective Rent
10 Westwind Construction $22,600,000 1
SOURCE: YARDI MATRIX, REAL CAPITAL ANALYTICS, AXIOMETRICS
2 3
DATA AS OF DECEMBER 31, 2020 SOURCE: BUREAU OF LABOR STATISTICS
West Michigan Research & Forecast Report | Multifamily | Colliers International West Michigan Research & Forecast Report | Multifamily | Colliers International
MULTIFAMILY
TOTAL YOY GROWTH
TRANSACTIONS
VOLUME
Last 4 Quarters $659,194,534 18%
This Quarter $217,553,533 204.94% Owners and would be sellers were often found asking themselves
# OF PROPERTIES
“what do I do with my sale proceeds?” The largest impediment
to transaction volume was not a lack of capital in the market, but
Last 4 Quarters 56 3.70%
a relectuance of owners willing to sell as many would-be sellers
This Quarter 13 30.00% refinanced at extremely favorable rates, placing their tax-free
UNITS proceeds into a war chest to pounce on their next acquisition
Last 4 Quarters 7,076 31.87% when the time comes. The bid-ask between buyers and sellers
This Quarter 1,825 158.13%
is looming, but not as signifcant as intitially thought at the onset
of the pandemic as the debt market remains favorable and
PRICE/UNIT
capital demands in the market compress capitalization rates.
Last 4 Quarters $73,485 16.11% Transaction activty in West Michigan was higher in 2020 than
ECONOMY & GRAND
GRAND RAPIDS
RAPIDS UNEMPLOYMENT
UNEMPLOYMENT RATE RATE This Quarter $113,178 79.97% 2019, with the majority of activity taking place in Q1 and Q4.
EMPLOYMENT
25.0
20.0
15.0
U.S. MULTIFAMILY
U.S. VOLUME
MULTIFAMILY VSVSCAP
VOLUME CAPRATE
RATE APARTMENT
APARTMENT CAP RATE
RATE COMPARISON
COMPARISON
Hope for a strong economic recovery is in 10.0
$800 9.0% 9.5%
sights as the successful vaccine adoptions 5.0
are rolled out, but the speed of an economic $700 8.5% 9.0%
recovery is largely dependent on the pace 0.0 8.5%
$600 8.0%
and efficiency of vaccine adoption to the
Jan-17
Jan-18
Jan-19
Apr-17
Oct-17
Apr-18
Oct-18
Apr-19
Oct-19
Jul-20
Jul-17
Jul-18
Jul-19
Jan-20
Apr-20
Oct-20
8.0%
Billions
$500 7.5%
entirety of the American population as well 7.5%
as the reopening of businesses nationwide $400 7.0%
7.0%
and consumer confidence. Grand Rapids had $300 6.5% US Apartment 6.5%
a much steeper decline in employment, with
a peak unemployment rate of 22% in April. GRAND RAPIDS
GRAND RAPIDSHOURLY
HOURLYMARKET INCOMETRENDS
MARKET INCOME TRENDS $200 6.0% Volume ($) 6.0% U.S.
$100 5.5% US Apartment 5.5% Michigan
The unemployment rate sat at 4.8% at the $27
Cap Rate Midwest
end of 2020, which is a tremendous sign $0 5.0% 5.0%
$25
Avg Hourly Wage
as we move into the new year. In addition,
2020
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2002
2005
2008
2020
2011
2014
2017
the average hourly wage has grown 27% $23
since 2011, and continue to grow despite the $21
pandemic. The largest employment sectors $19
affected were Leisure and Hospitality (-15.7%
$17
YoY) and Manufacturing (-11.9%).
WEST MICHIGAN
MICHIGANHISTORICAL
HISTORICALTRANSACTION
TRANSACTIONVOLUME
2020
2011
2012
2013
2014
2015
2016
2017
2018
2019
WEST VOLUME
$1,400
$1,200
EMPLOYMENT SECTOR CURRENT SHARE YOY CHANGE CHANGE %
Mining, Logging, and Construction 5.2% 2,100 5.9% $1,000
Information 5.0% (400) -1.1%
Millions
$800
Financial Activities 0.9% (500) -6.8%
$600
Government 3.8% (2,100) -7.0%
Other Services 10.1% (5,300) -6.8% $400
Professional and Business Services 12.6% (5,700) -5.9%
$200
Trade, Transportation and Utilities 17.8% (8,100) -5.9%
$0
Education and Health Services 16.7% (9,800) -7.5%
2017 2018 2019 2020
Leisure and Hospitality 8.7% (11,700) -15.7%
Q1 Q2 Q3 Q4
Manufacturing 19.0% (18,600) -11.9%
SOURCE: REAL CAPITAL ANALYTICS
SOURCE: FRED, BUREAU OF LABOR STATISTICS
4 West Michigan Research & Forecast Report | Multifamily | Colliers International West Michigan Research & Forecast Report | Multifamily | Colliers International 5
CAPITAL
MARKETS
Capital markets for multifamily product remains favorable despite the many obstacles in 2020. Forthcoming, slow economic growth and
decline in rent collections may warn of tighter capital conditions as the 10 Year US Treasury ticked above 1.0% after the first of the year.
Grand Rapids-Wyoming MSA has very minimal delinquency while the more student-focused areas of Kalamazoo and and Lansing-East
Lansing saw the highest delinquency in the state of Michigan at 2.75% and 1.93%, respectively. Investors remain bullish on multifamily
as apartment assets typically produce 4-6% dividend yields, with many achieving far higher yields, which is better than sovereign bonds
or investment-grade corporate bonds. Agency lenders Freddie Mac, Fannie Mae, and Ginnie Mae funded a record $181 Billion in 2020
nationwide, a 16.8% increase from 2019. The rapid growth of the GSE’s might end in 2021 since the FHFA reduced Fannie and Freddie’s
loan allocations to $70 Billion, a 12.5% decline from 2020. FHFA also mandated at least 50% of new loans have an affordable component.
BALANCE SHEET LENDING SPREADS U.S. MULTIFAMILY SPREADS & PRICES MULTIFAMILY
PROPERTY TYPE MONTHLY CHANGE BPS LTV SPREAD OUTLOOK
Multifamily 22 193
COLLIERS
AT-A-GLANCE
E S TA B L I S H E D I N
68 T R A N S A C T I O N VA L U E
$129B L E A S E /S A L E
REVENUE
COUNTRIES
US DOLL ARS 70,000
$3.5B
US DOLL ARS
TR ANSAC TIONS
MANAGING
COMPROMISED OF
2B
SQUARE FEET
18,000
PROFESSIONALS
UNDER MANAGEMENT
$33B ASSETS
FOR MORE INFORMATION, CONTACT:
MATT J. JONES RYAN PENA
Associate Vice President Associate
Direct +1 616 988 5838 Direct +1 616 988 5811
Mobile +1 219 448 1787 Mobile +1 714 397 9938
matt.j.jones@colliers.com ryan.pena@colliers.com
333 Bridge Street NW, Suite 1200 | Grand Rapids, MI 49504 | www.colliers.com/westmichigan | 616 774 3500
You can also read
