TOP TAKEAWAYS: GlobeSt. Fall 2021 Apartments Conference
The following are Slatt Capital’s primary takeaways from the 30th annual GlobeSt. Fall 2021 Apartments Conference held at The Westin Bonaventure Hotel & Suites in Los Angeles, California.
- California got hit very hard during COVID but…
- Although some labor shortages persist, California has regained 75% of its jobs, which is an indicator of a big bounce back.
- 5.1 million jobs were created in the first 9 months of 2021.
- Plenty of high-paying jobs in the tech sector are available, even with companies leaving the state and work-from-home becoming more prevalent.
- 25% of US patents filed originate from California companies.
- Record low apartment cap rates in non-California markets have shifted at least some investors to consider California apartments more of a “value” play than they had previously with California’s high intrinsic land values, steady occupancy and rental increases, high replacement costs, and the difficulty to build new product.
- A recent survey indicated investors are expected to remain active in 2022.
- 55% of respondents plan a net increase in CRE Holdings of at least one property in 2022
- 62% plan to buy in next 6-9 months
- 42% plan to sell in next 6-9 months
- As development opportunities have continued to be more difficult to pencil, due to increases in costs and unfavorable political conditions, investors are more interested in existing product.
- Interest rates are exceptionally low but inflationary pressure could force the Fed’s had. Inflation continues to be the “Monster in the closet” during this economic recovery with everyone wondering how “transitory inflation” may play out.
- Due to significant liquidity in the market, competition amongst investors/buyers has been incredibly fierce.
- Value-add apartment transactions are in significant demand with even the most qualified buyers being left in 2nd and 3rd place at best and final.
- The debt panelists each agreed that 2022 will see continued record liquidity, particularly in the Agency MBS, bridge, and CLO markets with debt investors chasing yield in this ultra-low interest rate environment.
- Due at least partially to end-of-year increases in volume and earlier concerns over potential changes to the 1031 exchange rules, 3rd party report providers, title folks, CPAs and attorneys are all currently above capacity which is increasing individual transaction timeframes and transaction costs.
Although attendance at this year’s GlobeSt. Apartments Conference was down from the last in-person event in 2019, it was still exciting to get the chance to network in person with all our close peers in the industry. Glad to see networking events take place live once again, and we look forward to seeing larger crowds at next year’s event.