Investors Prepare to Increase Activity in MF Market in 2010

By: Barbra Murray, Contributing Editor

The multifamily market has not escaped the ravages of the economic downturn, but investors are bullish on the commercial real estate sector for 2010. According to Jones Lang LaSalle’s 2010 Multifamily Forecast Survey, 90 percent of the 200 owners and operators surveyed plan to boost their activity in the sector next year, compared to the 68 percent of respondents who had such plans last year.

In 2010, it will be all about opportunistic pursuits, and the activity will be far greater than what investors had planned for this year. Approximately 57 percent of the 90 percent who will increase investments in multifamily expect to increase their investment activity by a healthy 60 percent, with 90 percent of that group being likely or very likely to focus on opportunistic investments. In 2008, only 44 percent planned to target this category. Value-add investments come in second place, as 60 percent of the investors who plan to increase their activity in the multifamily sector claim to be likely or very likely to seek value-add investments, a marked decrease from last year when most of the group–a whopping 88 percent–said they would target value-add opportunities.

What is not high on investors’ list are development and redevelopment properties, as 80 percent of survey participants claim they are less likely or not at all likely to purchase new development properties, and 60 percent claim they are less likely or not likely to acquire redevelopment projects.

Those seeking to enhance their portfolios will have more to choose from in 2010. Twenty-two percent of motivated investors and developers anticipate selling their opportunistic properties next year, compared to the 6 percent who had such plans last year. And 20 percent are likely to dispose of value-add properties. However, more owners, 12 percent compared to 25 percent in 2008, will hold on to their core assets.

As for locations of targeted assets, a whopping 80 percent of buyers are very to somewhat likely to mine the Southwest, an area that was equally popular last year. Moving way down the list of desirable regions is the Midwest; while 18 percent expressed interest in the region last year, a staggering 100 percent of survey participants say they are not likely to consider plunking down money in that area of the country.

Research reports support the conclusions of the survey regarding growing investor interest in acquisitions. “A tremendous amount of capital waiting for well-priced, quality assets to be offered for sale has been accumulated, and many investors have begun to move off of the sidelines,” Marcus & Millichap Real Estate Investment Services reported in its National Apartment Outlook report, released this month.