On the surface, a 43 percent drop in year-over-year transaction volume would be disturbing. But if you take a deeper look at the first-quarter report by New York-based research firm Real Capital Analytics (RCA), things don’t look quite as alarming.
Excluding portfolio deals, sales of individual apartment properties increased 28 percent compared to the first quarter of 2013. That’s because the massive $6.5 billion portfolio sale of Denver-based Archstone occurred in the first quarter of 2013, skewing the results in last year's favor.
Overall, the first quarter saw $18.7 billion in apartments change hands. Individual properties accounted for $14.5 billion of that volume, while portfolios comprised $4.2 billion of the tally. In fact, 11 properties priced above $100 million sold in the quarter.
“The number of overall properties sold is up,” says Ben Thypin, director of market analysis at RCA. “That shows that people are buying smaller properties in more secondary markets because there’s not as much attractive product in the primary markets.”
For Atlanta-based brokerage firm Apartment Realty Advisors (ARA), the first quarter turned out to be very good, which may reflect the firm's historical strength in secondary markets.
“ARA sales volume is more than doubled over the same period last year,” says Lisa Robinson, COO of Atlanta-based brokerage firm ARA.
Cap rates, coming in at 6.1 percent, held steady from the fourth quarter of 2013. Rates fell about 20 basis points for garden properties,while mid and high-rise rates saw a tiny increase. Price per unit dropped slightly—by six percent.
“It’s not alarming, but if this continues it’s a little more concerning,” Thypin says.