Beau Beery’s Multifamily Housing Update: A Market Poised to Rise

While the number of multifamily sales in central and north Florida collectively decreased nearly 24% from 2018, the median price per unit went up nearly 9% according to Beau Beery.

Beery, a Certified Commercial Investment Member with Coldwell Banker Commercial M.M. Parrish, focuses primarily on multifamily sales from Orlando north through Ocala, Gainesville, Volusia County, Jacksonville, and Tallahassee. At the 10th Annual Real Estate Forum in Gainesville on Feb. 6, he provided a detailed summary of 2019 sales figures and compared them with the previous year.

The primary takeaway—the decrease in the number of sales from 2018 to 2019 is primarily because a staggering 31.5% of all apartment inventory in the north Florida markets he covers have already sold in the trailing three years.

“Of the remaining 68.5% of inventory that hasn’t sold, how many already refinanced recently and therefore can’t sell? How many assets are owned by investors that never sell anyway? How many assets are owned by investors that would sell, but their price would be beyond reason?” Beery said.  “After such a robust three-year selling period, what you’re left with is a very small number of assets that could be purchased.”

A reduced inventory to purchase creates a supply issue. Low supply with still incredible demand and liquidity drives values up—hence the nearly 9% increase in median sales price per unit. In addition, the Gross Rent Multiple (GRM), which is a measure of how many multiples of annual rent an investor will pay in price, has increased 8.3%.

This means that in 2019 investors are paying 8.3% more for the exact same dollar of rent than 2018.  Meanwhile, rents only increased 4.76% in that same period. “So, not only has low supply increased closing prices per unit, but it has forced investors to pay more for an asset that has less income proportionally.” Beery states. Jacksonville’s decrease in number of sales was the highest in Beery’s region—and it was accompanied by a 23% increase in per-unit dollar amount.

In addressing the Gainesville student housing market, “Tallahassee is a few years ahead of us in what is probably an overbuilt student housing situation locally—which will affect all student housing but primarily, (complexes) more than biking distance away (from the university),” he said. “Those are the student housing complexes that are selling quite a bit. And a lot of them are converting to what we call market rate or conventional housing, where professionals live.”

Beery went on to say about Gainesville, “In 2019, student deliveries were only 417 beds. In 2020, we have 3,642 beds coming. Not planned, coming,” he said. “And then in 2021, there’s another 1,300+ beds that are possible. They’re entitled, they’re there, they’re under contract, or they’re in various stages (of planning).” Tallahassee was the only market in central and north Florida with an increase in the number of sales, primarily because of the sale of student housing assets.

Beery commented on other markets. In Volusia County and Ocala, for example, residents are more likely to live in their apartment for longer periods of time then college towns. Beery believes as a whole, most of the conventional (non-student) housing being developed will probably fare well in 2020. The student housing however, will be interesting to watch whether concessions and rent reductions begin. As for 2021 pipelines planned in both student housing and conventional, “I don’t know how we do that.”

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