For the second straight quarter, apartment sales showed robust growth as the transaction market continues to dust off a mediocre 2013.
Apartment sales hit $27.5 billion in the third quarter, a 28 percent increase compared to the third quarter of 2013, according to a report from New York-based research firm Real Capital Analytics (RCA). The quarter’s performance was driven by a staggering $22 billion in sales of individual properties, one of the highest quarterly figures on record. Three of those trades occurred in New York.
“In New York, there has been bunch of big trades of large older buildings that are undergoing condo conversion or at least renovation,” says Ben Thypin, director of market analysis at RCA.
In the third quarter, portfolio sales actually dipped almost $500 million compared to the third quarter of 2013.
“We’ve had so many portfolios sell over the past few years that it’s unlikely any of them are going to be resold during the next few years,” Thypin says. “There are only so many portfolios out there.”
The quarter also saw a return of volume activity for mid/high-rise properties in the six major metros—New York, Los Angeles, San Francisco, Boston, Washington, D.C., and Seattle. In number of properties sold, however, secondary and tertiary markets led the way as investors continued pushing further out in search of yield and taking advantage of available debt.
“What was holding those markets back in the first few years of the recovery was that, with the exception of the agencies, debt financing wasn’t as readily available,” Thypin says. “But now, between CMBS, the banks, and the agencies, it’s fairly easy to get debt financing on a secondary market purchase.”
Groups that traditionally lend in the secondary and tertiary market space, regional and local banks and CMBS, also saw an increase in originations. Regional and local banks captured 17 percent of all apartment lending (after sitting at less than 10 percent before 2013), while CMBS secured 13 percent of the market (after originating almost nothing in 2010), so far this year.