Summary
- KKR spends $2.1 billion on 18 apartment complexes across Texas, California, and New Jersey
- Banking credit risk continues to gain traction across the multifamily market
- U.S. housing market is characterized by tight supply and high prices, opening more opportunities for the rental market
- Austin homes prices rise faster than apartment rents creating demand in the rental market
- Houston-based developer, Dinerstein, breaking ground on multifamily project in Austin
- Capella Commercial received the green-light to develop 45-acre mixed-use project in Kyle
- Joint Base San Antonio’s economic impact has increased by 6.6% on average each year since 2019
- It’s official – Toyota is investing over half a billion dollars in San Antonio
- More details emerge on a potential new Spurs stadium downtown
National and State News
?KKR Makes Its Biggest Foray Into Apartments, Betting on Rising Rents (WSJ)
- Why it matters: One of the largest private-equity firms is confident in a multifamily rebound, paying $2.1 billion for more than 5,200 apartment units across the country mainly in California, Texas and New Jersey.
- In May, apartment-building prices experienced a decrease of over 20% compared to their peak in July 2022, and the sales of buildings were 44% lower than the levels seen a year ago in May.
- The recent acquisition by KKR, along with other significant purchases, may indicate that large investors are gaining confidence in the future increase of rents and values for apartments, even in Sunbelt markets where supply is growing rapidly.
- Investors are optimistic about the declining number of construction starts for new apartment buildings, as it suggests lower levels of new supply and the potential for faster-rising rents by 2026.
- JLL acted as the representative for Quarterra in this transaction.
Banking Credit Risk Spreads Across Multifamily Real Estate (CoStar)
- Why it matters: High borrowing rates and related costs are putting significant stress on the multifamily sector.
- Increased operating expenses for apartment owners, including rising interest rates, insurance costs, and other expenses, have led the Comptroller of the Currency to declare a rise in credit risk.
- Rent-controlled areas like New York City and California are experiencing income compression due to limited ability to offset escalating costs.
- The excessive construction of luxury properties in Sunbelt markets like Salt Lake City and Nashville is causing further depreciation of older properties.
When Will the Housing Market Crash? (U.S. News)
- Why it matters: Current housing market conditions, characterized by tight supply and high prices, may create opportunities for the rental market.
- Between March 2020 and March 2024, home maintenance costs have seen a significant increase of nearly 26%, reaching over $18,000 per year.
- The growth in households, driven by a rebound in immigration levels, continues to contribute to a substantial pent-up demand for housing, estimated to be in the millions.
- The supply of homes for sale remains significantly lower than the equilibrium point of supply and demand, primarily due to existing homeowners benefiting from low mortgage rates and choosing to stay in their properties. This situation is creating upward pressure on sales prices.
- In markets with an oversupply of rental units, rental vacancies are slightly higher than the equilibrium point of supply and demand. This offers new tenants the opportunity to negotiate move-in specials, including periods of free rent.
Austin News
Austin, Texas, Renters Face Barriers to Homeownership (CoStar)
- Why it matters: Austin home prices continue to increase faster than apartment rents, leading more to rent instead of own.
- Renters considering transitioning to homeownership still face a significant obstacle in the form of monthly mortgage costs, which have reached levels not seen since 2008.
- Home prices have surged by 106% since 2014, far surpassing the 33% increase in average asking rents. This significant price increase has contributed to the stability of the renter pool.
- The total monthly payment for a median-priced home, including insurance and taxes, is estimated to be $3,900, whereas a 1,100-square-foot, two-bedroom unit with a four/five-star rating rents for $2,000 per month.
The Dinerstein Cos. Expands Its Atlas Multifamily Brand Into Central Texas (CoStar)
- ?Why it matters: Houston-based multifamily developer expanding its footprint in Austin as the city consistently ranks as one of the most desirable places to live.
- Under its Atlas brand, Dinerstein has embarked on its inaugural project in Austin with the development of the 304-unit apartment complex known as Atlas Eastside.
- Over the past six months, Class A occupancy rates in the Northeast submarket have risen by 3%, indicating that rents have reached their lowest point and are now showing a steady upward trend.
- In Q1 2024, Austin's multifamily occupancy rate reached its lowest level since 2010, standing at 92.3%. Concurrently, rents experienced a year-on-year decline of 6.7%.
Capella Commercial gets green light to develop destination project in Kyle (ABJ)
- Why it matters: The project adds significant residential and commercial inventory to meet the growing demand in Kyle.
- "Project Two Step," a 45-acre mixed-use development located south of Austin, has been granted approvals by the Kyle City Council. Capella Commercial LLC is leading this initiative, which will encompass multifamily units, townhomes, commercial and office spaces, and an array of amenities.
- The development is planned to be completed in three phases. The initial two phases will prioritize the establishment of retail and restaurant spaces, residential flats, and an entertainment hub. The third phase will involve the construction of 350 multifamily units.
- By 2026, the project aims to transform into a distinctive and visually appealing destination. It will feature small businesses, local performers hosting events at an outdoor amphitheater, and a commitment to high-quality development standards.
San Antonio News
San Antonio military’s economic impact tops $50B (SABJ)?
- Why it matters: Joint Base San Antonio’s economic impact has increased by 6.6% on average each year since 2019.
- In 2023, Texas's 14 military installations made a significant contribution of $151.2 billion to the state's economy, with San Antonio playing a prominent role as the largest driver of economic activity.
- According to a recent study conducted by the Texas Comptroller of Public Accounts, over a third of Texas's total military economic impact, amounting to more than $55 billion, can be attributed to Joint Base San Antonio.
- Joint Base San Antonio has experienced a 33% increase in its contribution since 2019. Factors contributing to this economic growth at JBSA include the addition of military positions in aviation, cybersecurity, and healthcare.
- The military sector supports approximately 242,000 direct and indirect jobs in San Antonio, making a significant impact on the local economy.
Done deal: Toyota selects San Antonio for $531M expansion (SABJ)
- Why it matters: It’s official – Toyota is investing over half a billion dollars in San Antonio.
- Shortly after JCB, a U.K.-based company, initiated the construction of a manufacturing facility worth $500 million in San Antonio, Toyota has announced its decision to expand in the Alamo City with an investment exceeding $531 million.
- Toyota plans to augment its expansive Toyota Motor Manufacturing Texas Inc. production campus in South San Antonio by approximately 500,000 square feet, resulting in the creation of over 400 new jobs.
- David Marquez, the director of economic and community development for Bexar County, expressed his confidence in the manufacturing industry's growth in the region, stating that the consecutive major investments are indicative of the community's ongoing momentum.
- Commenting on the substantial investments and their potential impact, Jenna Saucedo-Herrera, President and CEO of greater:SATX, anticipated a significant ripple effect in terms of job creation and economic growth, especially within the advanced manufacturing sector.
San Antonio Spurs want to build a new $1.2B downtown arena (SA Express News)
- Why it matters: More details emerge on a potential new Spurs stadium downtown. ?
- According to anonymous sources, Spurs Sports & Entertainment is considering funding approximately one-fifth of the proposed arena project. Additionally, the NBA franchise owner is exploring the possibility of utilizing a city-controlled downtown tax zone to help finance the development.
- Sources suggest that the Spurs are likely to present a mixed-use development plan surrounding the arena, which could include apartments, restaurants, retail stores, and office spaces. Team owners in other cities have implemented similar strategies when building sports facilities. However, it remains unclear whether the estimated cost of $1.2 billion includes the expenses for these additional components.
