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Here's What's Happening In The Market, Here’s What This Means For You
With Investors Flocking to Certain Assets, What is the Next Value Play for CRE?
As time goes on and cap rates continue to fall, we’re seeing a lot of multifamily investors move to other investments or out of state in order to find value. Some investors are becoming satisfied with looking for “less expensive.”
What we’re also starting to see is interest in specialty products like self-storage, manufactured home parks, cold storage, data centers. People want that now. They’re specialty items for a reason. But the demand is far outpacing the supply in these areas. Many of the REIT’s are converting office assets to data centers or life science labs. Their buying at a 7 or 8% cap rate, investing some capex, and revaluing it to a 3 or 4% cap rate. If you're getting priced out of the Southern California multifamily market maybe it’s time to look at other areas or other assets. And as is the case for Southern California multifamily there are more buyers than assets for sale.
The savviest real estate investors right now are not afraid to be creative and envision a higher and better use for unloved assets.
Orange County
Orange County multifamily had 13 Closed Sales Last Week. This is down from 15 closed sales in the prior week and is on the lower end of the weekly closed sales range. Closed Sales - Average Days on Market was normal and indicating strong demand still at 30 days. 8 of the 13 closed sales were Transactions That Sold At or Above Asking Price. Another indicator of strong investor demand.
This week’s SALE OF THE WEEK For Orange County is an 8 unit building on Florida St. in Huntington Beach. The property was listed at $3,490,000 and sold for $3,555,000 in 26 days. The units were all 2 bedroom 1 bath. Most of the rents were at or near market rates. The interiors and exterior were both remodeled. The interior improvements were new kitchen cabinets and granite counters and Frigidaire appliances, including all in one washer and dryer inside each unit. Exterior improvements consisted of a custom BBQ island and the building was gated with key coded front and rear entry gates, gated parking with remote control entry and building security cameras. The property sold at 25.7 x gross and at a 2.43% cap rate. The price per sq. ft. was $955. In comparison, the Orange County average price per sq. ft. is $637.
Orange County multifamily inventory slipped downward again with just 4 New Listings Last Week. The Total Number of Active Listings now stands at 123 total listings. The overall number of listings has been trending downward for several months. Months of Inventory remained at 3 months. We’ll have a new monthly Absorption Rate next week which will give us an indication of how things have changed over the last 30 days.
List of Closed Sales
Live MLS Link PDF Link SALE OF THE WEEK
Southern California
Long Beach multifamily had 7 Closed Sales Last Week. This is one less than the prior week as we’re seeing a downward trend overall for weekly Long Beach closed sales. The Closed Sales - Average Days on Market was similar to most areas of Southern California at just 28 days. There were 4 of the 7 closed sales that were Transactions That Sold At or Above Asking Price. This continues the trend for Long Beach which has been averaging about half or more of the weekly transactions that sell at or above the original asking price.
The Long Beach SALE OF THE WEEK is a 16 unit building on Cherry Ave. This property hit the market at a 4.93% cap rate and was listed and sold at $2,550,000 in 22 days. Built in 1923 and consisting of all single or bachelor units of approx. 281 sq. ft. each. The property is located in the highly desirable Rose Park and Alamitos Beach area. The entire electrical system was completely replaced and the plumbing was updated to copper. The property sold at 12.85 x gross and just $159,000 per unit. The price per sq. ft. was $565. The average price per sq. ft. in Long Beach is $494.
Looking at the Long Beach listing inventory. Long Beach had a strong week of new inventory with 13 New Listings Last Week. This brings the Total Number of Active Listings up to 96 listings. This is the highest number of total listings for Long Beach in 6 weeks.
List of Closed Sales
Live MLS Link PDF Link SALE OF THE WEEK