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A Decade of Ventura County Apartments Transactions: Rough Seas Trending Towards Solid Ground
Parker Shaw, Multi Family Investments
In 2010, Ventura County saw a total of 17 multi-family transactions (those consisting of 5 or more units). This number represents nearly a 90% increase in sales volume from 2009. Nationwide there were just over 5,000 transactions representing a year-over-year increase of 65%. Much of this increase can be attributed to the loosening of the capital markets and the strong fundamentals of apartments, in comparison to other investment real estate.
To get a better perspective of last year’s sales it’s helpful to take a look back at the historic numbers for Ventura County. The 17 transactions in 2010 are nearly double the amount seen in 2009, yet still far below Ventura County’s ten-year average of 35 transactions per year. Already this year, there are 4 buildings (239 units) under contract (one each in Oxnard, Ventura, Fillmore, and an institutional Class “A” asset in Camarillo).
Based on this early increase of velocity during the first 2 months of this year, and the number of active well-qualified buyers in the marketplace, it appears that 2011 will be another year of improvement in the multi-family investment arena.
As recently reported by the Wall Street Journal, values of apartment buildings nationwide rose 16% in 2010, after falling 27% between 2006 and 2009. It is also projected that in 2011, the U.S. apartment market will experience revenue growth of 6%, rent increase of 5%, and occupancy increase of 1%.
As these trends continue, we can expect to see further compression of cap rates. This compression will initially affect class “A” assets in primary markets. It is expected to take longer for secondary markets and inferior product to start to see cap rates come down.
Cap rates today are still more than 100 basis points higher than pre-recession levels. However, we have seen cap rates start to compress on a transaction by transaction basis, offering further evidence of increasing values and strengthening fundamentals. Finally, the average cap rate has been relatively flat over the past year, due in large part to the lack of transactions in Ventura County which has, for the most part, kept values relatively stable.
2010’s average price per unit of $114,631 shows definite decline in the market as it is significantly lower than the ten year average of $135,676/unit. However, if you look back at the average in 2000, the price per unit is nearly double what it was at the beginning of the decade, showing a continuously strong positive trend, with the exception of the past few years.
As the home ownership rate continues to correct itself, and demand for rental property dramatically exceeds supply, the consensus is that the apartment market will continue to strengthen and outperform other investment real estate.
To get a better perspective of last year’s sales it’s helpful to take a look back at the historic numbers for Ventura County. The 17 transactions in 2010 are nearly double the amount seen in 2009, yet still far below Ventura County’s ten-year average of 35 transactions per year. Already this year, there are 4 buildings (239 units) under contract (one each in Oxnard, Ventura, Fillmore, and an institutional Class “A” asset in Camarillo).
Based on this early increase of velocity during the first 2 months of this year, and the number of active well-qualified buyers in the marketplace, it appears that 2011 will be another year of improvement in the multi-family investment arena.
As recently reported by the Wall Street Journal, values of apartment buildings nationwide rose 16% in 2010, after falling 27% between 2006 and 2009. It is also projected that in 2011, the U.S. apartment market will experience revenue growth of 6%, rent increase of 5%, and occupancy increase of 1%.
As these trends continue, we can expect to see further compression of cap rates. This compression will initially affect class “A” assets in primary markets. It is expected to take longer for secondary markets and inferior product to start to see cap rates come down.
Cap rates today are still more than 100 basis points higher than pre-recession levels. However, we have seen cap rates start to compress on a transaction by transaction basis, offering further evidence of increasing values and strengthening fundamentals. Finally, the average cap rate has been relatively flat over the past year, due in large part to the lack of transactions in Ventura County which has, for the most part, kept values relatively stable.
2010’s average price per unit of $114,631 shows definite decline in the market as it is significantly lower than the ten year average of $135,676/unit. However, if you look back at the average in 2000, the price per unit is nearly double what it was at the beginning of the decade, showing a continuously strong positive trend, with the exception of the past few years.
As the home ownership rate continues to correct itself, and demand for rental property dramatically exceeds supply, the consensus is that the apartment market will continue to strengthen and outperform other investment real estate.
All information provided herein is from sources deemed to be reliable, but no guarantee or warranty is stated or implied.
Copyright 2011 Dyer Sheehan Group, Inc.
Copyright 2011 Dyer Sheehan Group, Inc.