Dive Brief:
- Apartment sales volume fell 8% year over year to $12.5 billion in August, according to a report that data firm MSCI Real Assets shared with Multifamily Dive. However, sales of individual properties, a gauge of sector health, rose 11% YOY to 11.2 billion.
- At the same time, portfolio activity declined by 64% YOY in August to $1.3 billion, which pulled down overall sales. In August 2024, KKR closed a deal to acquire 19 purpose-built student housing properties from BREIT for approximately $1.64 billion, representing 46% of the total volume that month. Even without that deal, sales would have shrunk in August.
- The Real Capital Analytics commercial property price indexes for multifamily ticked up 0.2% YOY, according to MSCI. A year ago, prices were declining at a rate of 6% annually. Cap rates have remained flat at 5.5% since August 2024.
Dive Insight:
Overall, mid- and high-rise sales in August fell 3% to $5.9 billion, though individual trades of these properties jumped 39% YOY on the strength of the sale of 800 Fifth Avenue in New York City for $810 million. Garden property sales decreased 13% YOY to $6.5 billion, primarily due to a decline in portfolio sales.
Apartment transactions remain below the level recorded before the Federal Reserve’s rate hikes took effect. “Transactions have been very slow in real estate over the last couple of years, and, you know, dating back to early 2022,” said Dan Byrnes, CEO of Seattle-based apartment owner Security Properties, told Multifamily Dive.
However, Byrnes said interest from institutional equity sources is strong, with insurance companies, opportunity funds, endowments and pension funds showing interest in the space due to future supply-demand dynamics.
“It [their interest] has not been stronger at any point in the last several years,” Byrnes said. “We're seeing pretty universally strong interest across our investor pool. All of them are actively looking for multifamily deals right now.”
Interest rate cuts could also drive sales. While industry observers were pleased with the Federal Reserve's decision to cut its benchmark interest rate by 25 basis points earlier this month, they would like to see further reductions.
Pete O’Neil, national director of research for Minneapolis-based commercial real estate services firm Northmarq, said that further reductions extending into 2026 could impact valuations and transaction activity.
“If rate cuts succeed in supporting faster economic growth and job expansion, that could also translate to stronger renter demand,” O’Neil said in emailed comments to Multifamily Dive. “A boost to operational fundamentals would, in turn, positively impact values.”
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