IPO 3rd Quarter Report
October 10, 2022 – Bloomfield Hills, MI
IPO is pleased to announce our 2022 multifamily investment sales thru Q3 for the Midwestern markets we serve. Overview statistics coupled with a current market outlook are shared below. IPO is on pace to break our 2021 sales numbers, which were at an all-time high. The YTD numbers are staggering, with over a half a billion in apartment sales volume, reflecting nearly 6,000 units and 70 different communities. Quarter-over-quarter we have seen a decline, as the market adjusts to a recent sharp uptick in interest rates. As the market settles, we expect sales to pick up next year as many “wait & see” investors will take assets to market, especially if we see a dip in rates in early 2023.
- Q3 closed with over $126M in transactional volume
- 18 investment sales transactions; reflecting 1,096 units in total
- Impressive regional coverage of major Midwestern markets: closings in Battle Creek, Columbus, Detroit, Flint, Fort Wayne, Grand Rapids, Holland, Indianapolis, Kalamazoo, Lansing, Saginaw, and Toledo
The sharp rise in rates that occurred over the last 90 days has created some challenges with financing for pending transactions. Market participants have been flexible for the most part, with equity and debt adapting to the changes that are occurring. IPO is still bullish on both the operating fundamentals and the transactional outlook based on the current economic climate, especially as it relates to the Federal Reserve efforts to tame inflation through aggressive Federal Funds Rate hikes. Thus far, interest rate increases have been largely offset by the strongest rent growth on record for the apartment industry, averaging nearly 10% year-over-year in most Midwestern markets. For most of this year, rising debt costs were offset by rapidly rising rents. With the most recent rate hike, many assets have now been dinged from a valuation standpoint until rental growth catches pace with interest rates. For both supply and demand reasons as well as the reality of inflation, IPO expects rent growth to remain very strong as far as the outlook stretches. Additionally, it is expected that interest rates will moderate once the final projected rate hikes are posted this year, which we suspect would be 25 to 50 basis points, as opposed to the 75 BPS that the Fed has used in the last 3 meetings. We feel the worst is behind us, but there are concerns of a recession tempering rent growth and denting fundamentals. While the water is a little murkier, a few things are very clear: the overall operating fundamentals of the business are outstanding, and both equity and debt investor demand is very strong because short-term rental real estate is the best hedge in an inflationary environment. That is why Blackstone just launched the biggest fund in commercial real estate history ($30 Billion) to focus on buying apartments. As it has been for the past 5 years, it is still an excellent time to be both a Seller and a Buyer of apartments.
We would like to thank our clients for entrusting us with your multifamily investment brokerage needs. As this market evolves, we are a brokerage that is made up of nimble and creative problem-solvers who navigate deals in challenging landscapes to closings. We strive to be the best brokerage in the apartment industry and reflect it in everything we do. Our goal is to build partnerships that stand the test of time and deliver significant value for our clients in the process, creating generational wealth.
Income Property Organization in Bloomfield Hills, Mich. offers customized multifamily brokerage services that are designed to meet the specific needs of a wide range of clients — private owners as well as institutional investors — who want to buy or sell multifamily assets. To learn more or inquire about multifamily investment opportunities, contact IPO at (248) 932-0300.