Metro Volume and Pricing
Reis reports eight multifamily deals completed in the second quarter of 2012 for a transaction volume of $234.5 million. The deals closed at a mean price of $291,000 per unit. The largest monetary sale of the quarter was the 909 At Capitol Yards, with 264 units, at 909 New Jersey Avenue, in the Capitol Hill/Southwest submarket. The property sold in April for $95,427,000. The sale price per unit was $361,466. The estimated going-in cap rate was 3.6%. The buyer was 909 New Jersey Acquisition LLC and JP Morgan Asset Management Group.
The Capitol Hill/Southwest submarket saw the greatest number of units sold, at 510, and the largest transaction volume, at $189 million, in the second quarter. This submarket had the second-highest price per unit at $371,188. Downtown/Logan Circle followed with 360 units sold for $160 million. The price per unit was highest here at $443,183.
Cap Rate Comparisons and Forecasts
The mean cap rate for second quarter sales is 5.3%, up 210 basis points from the previous quarter, indicating a confidence on the part of property owners about the worth of their assets. This rate is more in line with the rates that prevailed through most of 2011. The 12-month rolling cap rate finished the quarter at 5.8%, in line with the prior readings of the previous two quarters. The rate for the South Atlantic region was 6.8%; the rate for the United States was 6.5%. Both changed only slightly over the quarter. The rolling rate is forecast to continue declining, if slightly, through 2016.
“As the regional employment picture generally continues to improve, more people are forming households. More of those households are renting,” observers Cassidy Turley. “Such increased demand from these additional renters is helping to prop up multifamily fundamentals in the region.” “Multifamily construction permitting and starts will gain momentum throughout 2012 as developers position for an extended period of consistent rental housing demand,” according to Marcus & Millichap. For its part, Reis forecasts solid rents and net absorption for the rest of the forecast period.