Investors recharging activity with $9B+ of multi-housing offerings coming to market
JLL Capital Markets explains how early entrants can gain first mover advantage for multi-housing.
CHICAGO, July 28, 2020 – The Coronavirus introduced a 90-day lull in new property offerings in the United States, but investors are ready to shift their capital off the sidelines and back into purchasing commercial real estate assets again. There is a heightened focus from capital on defensive sectors, and the multi-housing sector is well-positioned to benefit from increased activity. JLL’s Capital Markets experts, who carefully track investment transaction interests and trading probabilities, are preparing more than $9 billion of multi-housing assets that are being marketed or will hit the market in the next 30-45 days.
“We’ve seen an increase in the number of ‘broker opinions of value’ requests in the last 30 days as owners seek more visibility into asset values,” said Matthew Lawton, Executive Managing Director, Capital Markets, JLL Americas. “We’re identifying the strongest multi-housing assets to put on the market to drive pricing in an opaque market.”
While the bid-ask spread may vary, previous cycles have shown that the early entrants into multi-housing can gain first mover advantage. Multi-housing has become the most liquid asset class in the United States accounting for 37.6 percent of national transaction volume in 2019.
In the past two downturns, during a transaction volume trough, buy-side advantages favored investors who purchased ahead of rent increases. Elevated effective rent growth and diminished concession packages illustrate upside potential, as supply-side fundamentals are favorable in the early years of the recovery (chart 1).
First mover advantages arise in multi-housing sector following downturn
Analysis of last cycle: fundamentals favorable for early entrants
“We’re seeing rent collections nationwide come in better than expected from renters,” added Lawton. “That gives investors more confidence, and they are likely to use the next few months to get ahead and place capital and gain first-mover advantage, particularly given uncertainty related to the upcoming U.S. presidential election.”
Commercial real estate continues to gain favor as a preferred asset class for institutional investment, with target allocations rising from 5.6% in 2010 to 10.5% in 2019. Even in the COVID-19 recessionary environment, JLL sees increased activity into real estate as the sector outperforms other asset classes (chart 2).
Institutional target allocations continue increasing as CRE outperforms
Institutional investors' CRE target allocations
JLL (NYSE: JLL) is a leading professional services firm that specializes in real estate and investment management. JLL shapes the future of real estate for a better world by using the most advanced technology to create rewarding opportunities, amazing spaces and sustainable real estate solutions for our clients, our people and our communities. JLL is a Fortune 500 company with annual revenue of $18.0 billion, operations in over 80 countries and a global workforce of more than 94,000 as of March 31, 2020. JLL is the brand name, and a registered trademark, of Jones Lang LaSalle Incorporated. For further information, visit jll.com.