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News release

Los Angeles

Jones Lang LaSalle 2010 Multifamily Forecast Survey Predicts Increased Interest in Multifamily Investment

Percentage of investors seeking to purchase opportunistic multifamily assets doubles in one year


LOS ANGELES, Oct. 08, 2009 — While the economy struggles to regain its footing, investors are gearing up to increase their investment allocation into multifamily product next year, said 90 percent of the owners, investors and developers surveyed in Jones Lang LaSalle’s 2010 Multifamily Forecast Survey. The firm’s annual survey was sent to more than 200 major owners and investors within the multifamily commercial real estate arena.
 
“When we asked this same question of multifamily and investors and owners last year, only 68 percent said they planned to increase their investments in multifamily in the following year.  This year, that number has jumped to 90 percent of respondents, which indicates a growing shift in investor sentiment.  Multifamily is a sector to watch in 2010 as investors seek strong, stable assets with growth potential,” said Jubeen Vaghefi, Managing Director and leader of Jones Lang LaSalle’s multifamily capital markets practice.
 
Acquisition plans 2010
 
Of the 90 percent of investors expected to increase multifamily investment, 57 percent plan to increase investment in the sector up to 60 percent in 2010.
 
When asked which type of product within the multifamily sector they would seek to acquire in 2010, a clear road toward opportunistic investments formed as an overwhelming majority (90 percent) say they  would be likely or very likely to pursue opportunistic investments in 2010. This more than doubles the 44 percent of investors who were seeking to purchase opportunistic assets last year.
 
Sixty percent say they are likely or very likely to invest in value-add investments (down from 88 percent interest last year), while half (50 percent) also say they are likely to invest in core assets.  Conversely, more than three quarters of respondents (80 percent) say they are less likely or not likely to acquire new development, while 60 percent say the same for redevelopment.
 
Disposition plans during 2010
 
Buyer interest may soon match seller motivation as investors and developers plan to dispose of opportunistic assets high in demand in 2010. The disposition plans revealed included:
 
  • 22 percent say they are likely to dispose of opportunistic assets (up from 6 percent in 2009)
  • 20 percent say they are likely to dispose of value-add assets (up from 12 percent in 2009)
  • 12 percent say they are likely to dispose of core assets (down from 25 percent in 2009)
“While it appears opportunistic and value-add plays will be the types of assets hitting the marketplace in 2010, it’s clear that a majority of those surveyed plan to hold on to their strong-performing properties in the year to come,” said David Young, Managing Director, Jones Lang LaSalle.
 
Cap rates, rents, and condos in 2010
 
The survey of top investors and owners also yielded a number of other interesting results pricing and valuation results.  For example, 64 percent of respondents predict multifamily cap rates will increase in 2010, while 27 percent believe there will be a decrease and the remainder (9 percent) predict there will be no change in cap rates.  As for apartment rents for 2010, none predicted rents would rise at all during the year, while 50 percent believe that rents will fall by 5 percent.  According to the respondents, the Southwest and the Southeast will likely be affected by the shadow condo market—weighing in at 72 and 80 percent, respectively.
 
Regional breakdown of multifamily spending for 2010
 
As to where investors and developers plan to spend their multifamily dollars in the coming year, 80 percent of respondents are very to somewhat likely to look toward the Southwest, (steady from 82 from 2009) while slightly fewer (77 percent, down from 88 percent from 2009) are very to somewhat likely to invest in the Northwest.  While 18 percent of the respondents last year had indicated interest in Midwest investments, this year 100 percent indicated they are not likely to invest in the region in the coming year. Neither Canada nor Mexico appears primed for investment either, as 86 percent of respondents for both said they were not likely to invest in those countries.
 
The future of Fannie and Freddie in 2010
 
The slowly thawing capital markets appear to have influenced respondent’s answers, including the strength of Fannie Mae and Freddie Mac as a capital source in the coming year.  Slightly over a third (36 percent) say there will be the “same ability to source capital,” which is up from 22 percent in last year’s survey.  While many still predict it will be “more difficult to source capital” from the government-sponsored entities in the year ahead, the number has dropped precipitously from 56 percent in 2009, to a current 27 percent in 2010. 
 
A Return to Liquidity?
 
As to when liquidity will be fully restored to the market and pricing will reach some sort of equilibrium, respondents are quite clear:  None believe it has already been restored, or believe it will happen within the next six months.  More than half of all respondents (55 percent) say restoration of liquidity and pricing will be achieved within the next 12 to 18 months, while 36 percent say it could take 18 months or more.
 
“Savvy investors within the apartment sector are beginning to make critical, targeted investments in opportunistic plays in segmented regions of the country,” said Jeff Morris, Managing Director, Jones Lang LaSalle.
 
Jones Lang LaSalle Capital Markets is composed of a broad range of real estate investment debt and equity specialists, and corporate finance experts, working on all property types and in all the major national markets on behalf of major institutional and local investors and developers, as well as corporations.  The firm's Capital Markets professionals are highly skilled at pinpointing and tailoring the right capital solutions for each of these client's needs.  The Development and Asset Strategy team specializes in the sale of non-income-producing properties in their various forms from surplus buildings to raw land to entitled parcels and partially completed subdivisions.  The Investment Sales teams assist investors in developing and executing asset recapitalization strategies for office, industrial, retail, multifamily, healthcare and seniors housing product. The firm’s Real Estate Investment Banking experts raise debt and joint venture equity for investors and developers, and provide derivatives structuring and loan sale advisory services.  The Corporate Capital Markets professionals help corporations develop and execute strategies that bridge their occupancy, capital deployment and financial reporting objectives for their facility portfolios.  The firm's Value Recovery Services assist clients affected by the current financial crisis by creating value while managing risks through evaluating operational and occupancy needs, assisting with challenged assets and liabilities on their balance sheets, providing receivership services, asset management, raising capital through sales-leasebacks and providing leasing and recapitalization strategies for distressed assets. In the past two years, the firm’s Capital Markets team handled $117 billion of transaction volume.
 
About Jones Lang LaSalle
 
Jones Lang LaSalle (NYSE:JLL) is a financial and professional services firm specializing in real estate. The firm offers integrated services delivered by expert teams worldwide to clients seeking increased value by owning, occupying or investing in real estate. With 2008 global revenue of $2.7 billion, Jones Lang LaSalle serves clients in 60 countries from 750 locations worldwide, including 180 corporate offices.  The firm is an industry leader in property and corporate facility management services, with a portfolio of approximately 1.4 billion square feet worldwide. LaSalle Investment Management, the company’s investment management business, is one of the world’s largest and most diverse in real estate with more than $36 billion of assets under management. For further information, please visit our Web site, www.joneslanglasalle.com.
 
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