When you talk about Southeast commercial real estate, you consistently hear three top- ics of discussion: multifamily, mixed-use and distressed assets.
Although it’s clear that Atlanta’s office
market has made a massive rebound and
Miami’s industrial market is booming—and
although it’s obvious that Memphis,
Raleigh, Charlotte and other southern cities are rebounding strong from the Great
Recession on most fronts—multifamily,
mixed-use and distressed assets are still the
hot buttons as the Southeast begins competing nationally with other regions.
“More so than in other regions, we’re
seeing greater national focus on the
Southeast,” says Charles Williams, senior
vice president and southeast regional man-
ager at KeyBank Real Estate Capital. “Our
clients are continuing to look closely at the
Carolinas, Florida and Georgia, in particu-
lar. We’re seeing more people moving away
from the Rust Belt and toward areas like the
Sunshine State and Carolinas. This popula-
tion boom combined with the trend of
Millenials postponing home ownership,
the multifamily sector remains red hot.”
Multifamily Melts the Thermometer
It’s not a new story, but multifamily
remains the hottest trend in the Southeast.
You can measure the temperature of the
multifamily market in the region by drilling into the major metros. According to
Marcus & Millichap, metrowide vacancy in
Atlanta has improved nearly 500 basis
points since 2009 to hit 4.9%. In Miami,
vacancy sits at 3.5%. Orlando sits at 6%.
Kevin Finkel, executive vice president of
Resource Real Estate, which focuses on the
multifamily sector across 21 states, says rent
growth is strong for class B and C apart-
ment communities in the Southeast, espe-
cially those that serve the US workforce
renter. Rent growth, he continues, is slow-
ing a bit for class A properties but the over-
all multifamily market is still hitting on all
cylinders. But he does have one concern.
“The vast majority of new apartment
construction is urban and high-end—
class A-plus construction—that targets
rents at or above $2,000 per month. There
is virtually no new apartment supply being
built for the workforce,” Finkel says. He
expects this to be a long-term trend
because there is no market or governmental mechanisms that encourage developers to create new workforce housing with
rents at about $1,200 per month given the
high cost of land and construction.
“We believe multifamily real estate firms
with the experience and capabilities to fully
renovate the aged apartment inventory available today into upgraded rental options that
are in high demand by today’s workforce
offer a significant opportunity,” Finkel says.
Meanwhile, there are plenty of new multifamily projects rising from Southeast dirt.
By Jennifer LeClaire
Southeast REAL ESTATE