Central Texas Roundup | JLL Multifamily | 10/21/24

Summary

• The WSJ’s latest survey shows that economists are more upbeat about economic growth and the cooling path of inflation
• Fees from investment banking jumped 56% from a year ago – cementing a broad rebound across Wall Street
• CMBS shifts to more multifamily, less office financing.
• $500M multifamily portfolio sale signals renewed investor confidence.
• Rising mortgage rates may boost rental demand.
• Geyser Group set to build infill housing in east Austin.
• 900 units and 22,000 sqft of commercial space for Rochester development.
• Austin housing market stabilized after years of unsustainable sales.
• Williamson County approved 25% property tax abatements for Soulbrain (Samsung provider) for 10 years
• 250 units and 40,000 sqft of commercial space for Southtown Oxbow development.
• San Antonio and Austin real estate agents can now access each other's home listings thanks to a data share agreement between both cities' Realtor boards
• Hemisfair adds 304 units, boosting urban revitalization.
• Focus on density of services to match population growth

National

What 66 Economists Say About Where the Economy Is Headed, in Charts (WSJ)

• Why it matters:?The WSJ’s latest survey shows that economists are more upbeat about economic growth and the cooling path of inflation.
• Economists are now turning their attention to the labor market as inflation subsides. They anticipate the unemployment rate will reach approximately 4.2% by year-end.
• Additionally, economic forecasts suggest that lower interest rates will positively impact GDP growth, with projections indicating faster economic expansion for the remainder of the year compared to earlier predictions made in July.

Investment banking surge at Morgan Stanley solidifies Wall Street revival (Yahoo! Finance)

• Why it matters:?Fees from investment banking jumped 56% from a year ago, the largest leap among big banks, to nearly $1.4 billion – the results cement a broad rebound across the Wall Street operations of the country's biggest banks.
• Bank executives are expressing confidence that the Federal Reserve's anticipated interest rate reductions will stimulate increased deal activity in the coming months.
• However, the company's investment banking division faced challenges, particularly in its equity capital markets segment. This department generated revenue of $362 million, falling short of analyst expectations by $12 million.

Multifamily Loans Rise as Office Deals Fall (CoStar)

• Why it matters: The shift towards more multifamily loans in CMBS deals reflects changing market dynamics.
• Bank of Montreal's forthcoming commercial mortgage-backed securities (CMBS) offering features a majority share of multifamily loans, accounting for 51% of the package - a proportion not seen in over two years.
• This shift occurs alongside a sharp decline in office-related loans within CMBS transactions, which have fallen from 32% in 2022 to under 16% in 2024.
• These developments indicate a potentially more favorable financing landscape for multifamily investors and developers through CMBS channels, as well as growing investor confidence in the multifamily real estate sector.

Multifamily Investor Looks to Unload 10 Properties in Eight States for About $500 Million (CoStar)

• Why it matters: This large-scale portfolio sale by Trilogy Real Estate Group signals a potential shift in the multifamily market, indicating renewed investor confidence and liquidity.
• The transaction involves a diverse portfolio of 2,845 residential units spread across 10 properties in eight states, predominantly in the Midwest region, valued at $500 million.
• This sale aligns with an upturn in market optimism, partly fueled by the Federal Reserve's recent indication of anticipated interest rate reductions.
• The market climate appears increasingly favorable for sellers, as prominent multifamily investment firms such as Equity Residential and AvalonBay signal their preparedness to embark on significant acquisition campaigns.

Mortgage Rates Climb to Highest Averages Since August (CoStar)

• Why it matters: The recent rise in mortgage rates could impact the affordability and demand in the multifamily real estate market.
• As of October 17, the average 30-year fixed-rate mortgage climbed to 6.44%, continuing its upward trend for the third week in a row and reaching its peak since August.
• However, this rate remains more favorable compared to the same period last year when it stood at 7.63%.
• The current rate increase is attributed to robust economic conditions in the U.S. and evolving borrower sentiments.
• This shift in the mortgage landscape could potentially benefit the multifamily sector, as higher home financing costs may deter some potential buyers, leading them to opt for rental accommodations instead. Consequently, this could drive up demand in the rental market.

Austin

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Developer Secures $28.5M Loan For East Austin Infill Housing (ABJ)

• Why it matters: Geyser Group set to build infill housing in east Austin after securing construction loan.
• A new residential project called The Arden is set to occupy a five-acre plot at 4908 Lott Ave.
• This development will feature a townhome community, offering units ranging from 1,300 to 2,000 square feet, with layouts comprising two to three bedrooms.
• The project aims to address the shortage of mid-range housing options in the Mueller area, targeting a segment of the market that is currently underserved.

Developer Plans 936 Multifamily Units on Former Rochester Golf Course (Finance&Commerce)

• Why it matters: Texas developer wants to create more than 900 housing units and commercial space in Rochester.
• The proposed project encompasses 22,000 square feet of commercial space, along with a combination of underground and surface parking facilities, and necessary supporting infrastructure.
• As part of the regulatory process, the City of Rochester has published an Environmental Assessment Worksheet, a required step for a development of this magnitude.
• This initiative is designed to address the city's anticipated housing needs through 2030.
• While the Twin Cities region is experiencing a general decline in multifamily construction, Rochester stands out as an exception, having already approved permits for 955 new housing units in 2024.

Austin Housing Market Balancing Itself Out After Home Sales Soared a Few Years Ago (CBS Austin)

• Why it matters: Austin housing market balancing itself out after homes were selling at an unsustainable rate.
• Austin has experienced the most significant decline in housing turnover rate in the United States, with a 49% decrease compared to 2019.
• The market dynamics have shifted dramatically. Previously, the combination of low interest rates and limited housing inventory led to escalating prices.
• Now, the scenario has reversed, with high interest rates and abundant supply putting downward pressure on home prices. This shift has resulted in extended selling periods for properties, affording potential buyers more time and options in their decision-making process.

Williamson County approves incentives for South Korean company that will serve Samsung (Austin American-Statesman)

• Why it matters:?Williamson County approved 25% property tax abatements for Soulbrain for 10 years, contingent on investments of $175 million for phase one and $400 million for phase two.
• Soulbrain has committed to an initial investment of $175 million and the creation of at least 50 jobs over a five-year period, with plans for further expansion and employment opportunities in a subsequent phase.
• The company's facilities will manufacture essential materials for Samsung's $17 billion semiconductor plant in Taylor, playing a vital role in the chip production process.
• As part of its community engagement, Soulbrain will offer internships and job prospects for local high school students, while also making yearly contributions to civic causes. These initiatives are expected to boost both the economic landscape and educational opportunities in the area.

San Antonio

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Oxbow Development Group's Southtown Project Clears First Hurdle (SABJ)

• Why it matters: This development project in Southtown, San Antonio, highlights the ongoing trend of urban densification and mixed-use development in multifamily real estate.
• Oxbow Development Group has secured initial approval for their Southtown Aldea project, a mixed-use development that will introduce 250 market-rate residential units and 40,000 square feet of commercial space to the neighborhood.
• This project demonstrates a thoughtful approach to urban development by integrating historic preservation into its plans. Specifically, it includes the relocation and adaptive reuse of the Pollock Muench House, illustrating how multifamily developments can successfully merge contemporary construction with the preservation of local historical landmarks.

SA agents now have access to Austin listings — and vice versa (SABJ)

• Why it matters:?San Antonio and Austin real estate agents can now access each other's home listings supporting the growing megaregion.
• This partnership could prove especially beneficial for individuals who find themselves priced out of Austin's increasingly competitive housing market.
• It supports the expanding megaregion along the I-35 corridor between San Antonio and Austin, creating opportunities for home sellers in this area.
• The collaboration is particularly advantageous for clients relocating between these major markets, especially those who commute between the two cities. Additionally, it provides Austin-based real estate agents with a valuable resource for assisting clients who can no longer afford properties within the local Austin market.

Mixed-use Development at Hemisfair Wins Final Design Approval (SABJ)

• Why it matters: The approval of the Santa Rita project marks a significant step in enhancing mixed-use development within San Antonio’s Hemisfair, potentially boosting the multifamily market in the area.
• The Hemisfair project will introduce 304 new residential units, intensifying urban density and playing a key role in rejuvenating the city center.
• Such increases in downtown population density can have far-reaching positive effects, including bolstering local economies, creating more opportunities for multifamily housing projects, and fostering sustainable urban expansion.
• However, this development also underscores the complexities inherent in urban renewal efforts. These include the need to harmonize new construction with historical contexts and navigate financial challenges - factors that will likely shape future multifamily development initiatives in urban areas.

A Longtime Apartment Investor Digs Deeper into Downtown (SABJ)

• Why it matters: DJE Texas Management Group's investment in downtown San Antonio showcases a trend of multifamily investors diversifying into mixed-use developments.
• The firm has renovated a 62-unit apartment complex and is currently developing a range of amenities tailored to downtown professionals, including an exclusive golf simulator, dining establishments, and shared workspace areas.
• This approach of creating amenities based on resident preferences and market viability could set a precedent for other multifamily investors seeking to boost their properties' attractiveness.
• The emphasis on providing a high concentration of services to match the increasing population in urban centers reflects an emerging trend in multifamily real estate development.