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News release

Chicago

Investors Go Garden-Style in the Suburbs

According to JLL, multifamily investment reaches highest first quarter volumes ever recorded


The first quarter of 2016 was the strongest start to a year ever recorded in the multifamily sector, with transaction figures reaching a record $35.4 billion, according to JLL's U.S. Investment Outlook. This also represents the second highest quarter ever recorded. It's been six years and counting of multifamily investment momentum, leading investors to seek new avenues for opportunity and yield.

"Multifamily fundamentals are solid – construction starts are moderately slowing to keep supply and demand in check, absorption rates have held consistent at 1.6 percent and rents continue to grow," says David Williams, lead of JLL's Multifamily Capital Markets. "Given the tremendous amount of equity and debt capital committed to the multifamily sector, we expect cap rates to hold steady and transaction volumes to remain robust, especially in the suburban value-add and secondary market space."

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Private equity's mantra: secondary markets, portfolios, garden-style assets

Private equity and its penchant for secondary markets, portfolios and garden-style assets drove significant volumes in Q1. Private equity accounted for more than $8.2 billion in activity during the quarter, which more than doubles its comparable activity from the first two quarters of 2015.

Much of their strategy has focused on diversification to secure higher yields. Recent acquisitions, for the most part, feature at least two of the following traits: a secondary or suburban market location, garden-style apartment or portfolio.

 

  • Secondary markets notched nearly $8.9 billion in transactions, representing a 30.6 percent year-over-year increase. Private equity accounted for $5.0 billion or 60.2 percent of activity.
  • Private equity looks to garden-style assets as a play for yield, mirroring renters' preference toward more affordable rents.
  • Portfolio activity tripled year-over-year, with many portfolios featuring secondary market locations including Atlanta, Charlotte, Nashville, Orlando, Raleigh, Tampa, Dallas-Fort Worth, Austin, Denver and Silicon Valley. Additionally, many portfolios are comprised of garden-style apartments.

"Secondary markets, especially across the Sunbelt, are experiencing high levels of absorption, rent growth and acquisitions – all of which fuels debt and equity activity," said Faron Thompson, International Director with JLL's Multifamily Capital Markets. "Just last week, Fannie Mae and Freddie Mac saw their capped business allocations increase by $4 billion each, and lenders across the spectrum are interpreting the level of investment activity along with strong fundamentals as reason to demonstrate continued confidence in the multifamily sector."

JLL Capital Markets is a full-service global provider of capital solutions for real estate investors and occupiers. The firm's in-depth local market and global investor knowledge delivers the best-in-class solutions for clients — whether a sale, financing, repositioning, advisory or recapitalization execution. In 2015 alone, JLL Capital Markets completed $140 billion in investment sale and debt and equity transactions globally. The firm's Capital Markets team comprises more than 2,000 specialists, operating all over the globe.

 

For more news, please visit The Investor, an online and mobile app news source providing real-time commercial real estate news to asset buyers and sellers around the world.

For more news, videos and research resources on JLL, please visit the firm's U.S. media center Web page: http://bit.ly/18P2tkv.

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About JLL

 

JLL (NYSE: JLL) is a professional services and investment management firm offering specialized real estate services to clients seeking increased value by owning, occupying and investing in real estate. A Fortune 500 company with annual fee revenue of $5.2 billion and gross revenue of $6.0 billion, JLL has more than 280 corporate offices, operates in more than 80 countries and has a global workforce of more than 60,000. On behalf of its clients, the firm provides management and real estate outsourcing services for a property portfolio of 4.0 billion square feet, or 372 million square meters, and completed $138 billion in sales, acquisitions and finance transactions in 2015. Its investment management business, LaSalle Investment Management, has $58.3 billion of real estate assets under management. JLL is the brand name, and a registered trademark, of Jones Lang LaSalle Incorporated. For further information, visit www.jll.com.