Multifamily Quarterly
Urban infill has been the
product of choice for apartment
investors and developers, but job
growth and potentially higher
yields are pushing suburban
and secondary markets up the
totem pole
Is Infill Tapped Out?
In the days, months and even years following the Great Recession and the financial aftermath, it seemed as though multifamily was the rising star of commercial real estate. The
coming-of-age of Echo Boomers, combined with disillusionment
with home ownership, caused a good chunk of the population to
flee to rentals. Added to the issue was constrained supply from lack
of construction. The result was a commercial real estate sector at
which investors eagerly threw money and bid against one another
for ownership rights.
However, the multifamily
assets over which investors fought
was primarily infill, core product—projects and developments
located in central business districts or bustling urban submarkets.
Even as developers started ramping up again and bringing units on
line to meet the apparently insatiable demand, “coming out of the
recession, the only areas in which we saw new development were
those core, infill locations,” comments M. Patrick Carroll, founder
and CEO of Carroll Organization in Atlanta.
“We hadn’t really seen a whole lot of building over the past four
or five years,” adds Terry Gwin, president of Dallas-based SWBC
Real Estate LLC, a company that develops multifamily properties
nationwide while investing in apartment complexes in areas rang-
ing from infill to suburban. “But what has been built has been
urban infill, the downtown type of product.”
The popularity of infill, urban areas boils down to a handful of
reasons. Tenant demand seemed to focus on those urban locations,
By Amy Wolff Sorter
meaning less risk for the investors and builders. “Investors assume
it’s safer to be in a core location,” observes Carroll, whose compa-
ny’s M.O. is geared toward value-add multifamily investments
within the southern tier of the US. “Because of that, if someone was
interested in investing, they’d invest in those core locations.”
Peter Muoio, senior principal with Maximus Advisors and
Auction.com Research, also points out that the investment/builder
focus on urban areas continues strong, especially in the so-called
“gateway” cities on the coasts.
In recent months, AMLI Residential received approval to build
its 334-unit AMLI Uptown Orange in Orange, CA, on the site of an
existing Double Tree Hotel parking lot. Further north in California,
Avant Housing LLC, a joint venture between AGI Capital Group,
TMG Partners and CalPERS, with Essex Property Trust and
BRIDGE Housing, is working toward building a 563-unit urban-in-fill apartment development on Transbay Block 9, located in San
Francisco.
Meanwhile, in Pittsburgh, the 388-unit Washington Plaza
Apartments changed ownership (Faros Properties bought it).
Deep in the heart of Texas—more specifically, in Houston—
Behringer Harvard and Trammel Crow Co. recently launched
construction of a 270-unit project known as the Muse Museum
District on a two-acre site within the city’s Museum District.
The Marquette Cos. began going north on the 223-unit
Catalyst in Chicago’s West Loop submarket. Finally, the
California Public Employees’ Retirement System acquired the
136-unit Aldyn on Riverside Boulevard and the 209-unit Ashley
