REGIONALREPORT TriadApartments pay the rent for Bell
With credit so tight and the economy still weak, many would-be homeowners find themselves renting instead, and Bell Partners Inc. of Greensboro is narrowing its focus on apartment complexes. It’s already the 10th-largest apartment manager in the country, owning or operating about 60,000 units in 205 multifamily properties, most in the Mid-Atlantic states, the Southeast and Texas. Its $4 billion portfolio also includes 28 senior-living communities and more than 4 million square feet of retail and office property. Lili F. Dunn joined the company in early October as chief investment officer after 20 years at Arlington, Va.-based AvalonBay Communities Inc., the second-largest multifamily real-estate investment trust in the U.S.The past few years have been tough in the single-family-home market. What about multifamily housing?
As the economy slowed down, the supply of multifamily housing units reached historic lows. In 2010, there are projected to be about 75,000 multifamily-unit starts versus a 10-year average of 240,000 a year. Demand drivers are also strengthening because of accelerating job growth, favorable rental demographics fueled by “echo boomers,” and declining home ownership. These demand factors, combined with constrained supply, are creating very strong fundamentals for the apartment market.
Developers in other areas of real estate complain they can’t get money for projects. What about apartment developers?
Financing for new construction is more available than it was two years ago, but it is still difficult to obtain.
What changes have you seen in renter demographics?
The echo boomers I mentioned earlier are those in the 25-34 age group, the children of baby boomers. They have a 51% propensity to rent, and the group is expected to triple in size over the next 10 years.
Bell Partners recently sold the Wachovia Tower in Greensboro. Is now a good time to get out of commercial real estate?
I’m not in a position to talk about commercial-real-estate trends, but in the apartment market we are finally seeing positive, sequential rental revenue growth — that is, we expect to see year-over-year revenue growth in 2011 and a strong bounce back in 2012.
How has weakness in the single-family market affected demand for apartments?
The 30-year-mortgage rate is at historic lows, but it is still hard for a potential homeowner to get a loan. Lenders require higher down payments, greater proof of income and better credit ratings. As a result, the for-sale market remains soft, and home-ownership levels have dropped from 69% to 67% of existing homes, creating almost 2 million new renter households.
What happens when the single-family market recovers and renters start to buy? Will investors in apartment complexes be stuck with lots of empty units?
Although the single-family housing market eventually will stabilize, the demand drivers for apartments — the favorable rental demographics, accelerating employment growth and constrained apartment supply — will support good apartment fundamentals in the future. Either for their lifestyle or their affordability, apartments will remain an attractive option for people seeking housing.