KNOWLEDGE REPORT Multifamily Research & Forecast Report 2H Colliers International Ohio Multifamily Market Peaking, but Fundamentals Remain Strong U.S. Market Overview The U.S. multifamily sector shows signs of peaking during the current cycle, but the fundamentals remain strong indicating that the asset class still has room to run. After recording annual rent growth in the four to five percent range for a number of years, the rate of increases began to decline during. At mid-year, the year-over-year gain was 3.6 percent and by the end of the year, rents posted an annual gain of 2.6 percent. This rate of increase is still in line with the historical average. saw a record amount of new supply, increasing the nation s inventory by 2.1 percent by adding nearly 365,000 new units. Even so, demand kept pace, and occupancy remained unchanged from a year ago at 95.1 percent. It is expected, though, that construction volume will decrease going forward as the number of units currently in the pipeline has dropped to 382,000 from a peak in early of 478,000 units. New deliveries will total 330,000 units in 2018, which is still double the historical norm. Even as millennials age and move to single-family homes, Moody s forecasts that population growth in this key demographic group of 25- to 34-year olds will remain elevated for the next six years. Live/work/play, mixed-use developments that provide access to a diverse cross section of amenities, offer the ability to lead a healthy lifestyle and designed with environmentally friendly elements are and will continue to be in high demand. However, it is the Class B and C properties have experienced increasing demand, rising occupancies and above average rent growth. The slowdown in sales volume recorded during the rest half of the year appears to have been an aberration as sales totaling $87.7 billion were transacted during the second half of. The year s total volume of $150.3 billion is down 5.5 percent from last year s pace, but pricing remained unaffected averaging $145,244 per unit an increase of 0.6 percent year-over-year. Cap rates were unchanged averaging 5.6 percent. $463.9 B U.S. Sale Volume -5.5%* $14.4 B Midwest Sale Volume +9.0%* $1.4 B Ohio Sale Volume +16.9%* Apartment Transaction Volume *Year-over-year Change in Transaction Volume
Ohio Market Overview Ohio Apartment Market Data 2H ROW LABELS INVENTORY (# OF UNITS) VACANT UNITS ANNUAL DEMAND (UNITS) OCCUPANCY RATE (%) ANNUAL NEW SUPPLY (UNITS) UNITS UNDER CONSTRUCTION AVG MONTHLY RENT AVG RENT PER SF Cincinnati 153,518 6,596 616 95.7% 2,366 2,090 $904.00 $0.97 Cleveland 164,299 6,736 118 95.9% 1,360 1,849 $889.00 $1.00 Columbus 163,607 5,912 3,730 96.4% 4,614 5,319 $899.00 $0.97 Dayton 58,334 3,528-695 94.0% 920 1,011 $773.68 $0.86 Akron 43,356 2,090-864 95.2% 118 76 $922.19 Grand Total /Averages 583,114 24,862 2,905 95.4% 9,378 10,345 $877.57 $1.01 Source: MPF Research Historical Sales Volume/Average Cap Rate Historical Occupancy - Ohio Markets $1,500.0 9.0% 100.0% $1,375.0 $1,250.0 $1,125.0 8.0% 7.0% 99.0% 98.0% 97.0% Sales Volume ($ Mil) $1,000.0 $875.0 $750.0 $625.0 6.0% 5.0% 4.0% Avg Cap Rate 96.0% 95.0% 94.0% 93.0% 92.0% $500.0 3.0% 91.0% $375.0 $250.0 $125.0 $0.0 2007 2008 2009 2010 2.0% 1.0% 0.0% 90.0% Toledo Avg Cap Rate # OF UNITS Supply/Demand/Construction 6,000 5,500 5,000 4,500 4,000 3,500 3,000 2,500 2,000 1,500 1,000 500 0-500 -1,000 New Supply Demand Under Construction Source: Colliers Research, MPF Research, Axiometrics, Real Capital Analytics Historical Average Monthly Rent - Ohio Markets $1,000 $500 $550 2 Ohio Research & Forecast Report 2H Multifamily 95.0% Market Outlook Colliers International $1,000 $950 $900 $850 $800 $750 $700 $650 $600 $550 $950 $900 $850 $800 100.0% $750 99.0% $700 98.0% $650 97.0% $600 96.0% $500 94.0% 93.0%
Ohio Multifamily 2H Notable Sales PROPERTY NAME SALE DATE SALE PRICE NUMBER OF UNITS PRICE / UNIT BUYER SELLER MARKET CP Cincy Dec-17 $26,000,000 121 $214,876 Nelson Brothers M&A Real Estate Cincinnati Oxford West Jul-17 $24,750,000 304 $81,414 RISE Phillips Acquisitions Cincinnati Gantry Apartments Oct-17 $19,600,000 131 $149,618 Gantry Apartments LLC Hamilton & Blue Rock LLC Cincinnati Maple Oaks Townhomes Dec-17 $9,433,000 166 $56,825 Maple Oaks Residential LLC Edgewood Capital Cincinnati Woods of Turpin Sep-17 $8,475,000 164 $51,677 Towne Properties Steven A Stender; Raymond H Stender Cincinnati Greens of Turfway Oct-17 $7,920,000 88 $90,000 Spartan Villa LLC Premier Greens Of Turfway Llc Cincinnati Northwoods Apartments Aug-17 $6,250,000 108 $57,870 Northwoods Apartments Cincinnati LLC Apartments Of Northwood Ltd Cincinnati Crown Pointe Apartments Dec-17 $4,700,000 123 $38,211 Axiom Equity Investments 1, LLC BRG Realty Group LLC Cincinnati Fields Ertel Apartments Jul-17 $4,500,000 55 $81,818 TreeTop Development C-III Investment Mgmt Cincinnati Southview Manor Dec-17 $4,337,676 127 $34,155 King Communities Pro Man Property Management LLC Cincinnati Oakwood Jul-17 $4,300,000 65 $66,154 Blvd Capital Oakwood Apartments II LP Cincinnati Clearpointe Woods Apartments Dec-17 $4,163,500 155 $26,861 Allen Leung-Wolf Eastern Hills Investments LLC Cincinnati Amelia Court Apartments Dec-17 $4,000,000 95 $42,105 Phillip J Stover; Annette A Stover Unique Campus Rentals Cincinnati Oakwood Apartments Oct-17 $3,407,340 65 $52,421 BLVD Capital LJF Management Cincinnati Beechmont Towers & Washington House Apartments Sep-17 $3,375,000 103 $32,767 Sarner Capital Greater Cincinnati Apartment Management Inc Hickory Hill Apartments Sep-17 $8,200,000 178 $46,067 DMG Rentals 18 LLC Hickory Hill Apartments LP Alphada Place Nov-17 $5,300,000 152 $34,868 Watermark Partners Gross Family Ltd Cincinnati Cleveland/ Akron Cleveland/ Akron Worthington Meadows Nov-17 $54,380,000 528 $102,992 PIRHL Carlton Group Columbus Sterling Place Sep-17 $32,500,000 300 $108,333 The Connor Group CORE Realty Holdings Columbus Gateway Lakes Apartments Nov-17 $20,600,000 252 $81,746 Hamilton Point Investments Carlton Group Columbus Alkire Glen Apartments Jul-17 $20,000,000 252 $79,365 Realsource Porter Wright Columbus College Park Apartments Nov-17 $19,800,000 250 $79,200 Hamilton Point Investments Carlton Group Columbus The Reserve at Sharon Woods Oct-17 $14,000,000 186 $75,269 AndMark Domain Equity Inc Columbus Sutton Square Townhomes Oct-17 $9,657,755 202 $47,811 RealtyShares, Hamilton Sutton Square Property LLC Barrington Group Columbus Sheffield Oct-17 $8,230,000 136 $60,515 Evergreen Realty Group Columbus Arlington Pointe Nov-17 $7,765,000 112 $69,330 Coastal Ridge Arlington Pointe LLC Columbus King Avenue Sep-17 $4,900,000 24 $204,167 Northwood Properties D Scott Owens Columbus Mad River Oct-17 $25,000,000 302 $82,781 Mad River Investments LLC The Connor Group Dayton Ashton Glen Nov-17 $10,000,000 108 $92,593 VF1 Ashton Glen LLC Freestone Realty Advisors Dayton Red Coach Village Oct-17 $8,000,000 136 $58,824 Springfield Partners Property I LLC; Springfield Partners Property II LLC JRK Asset Management The Commons at Kettering Dec-17 $6,361,000 120 $53,008 Pauls Corp Realty Edgewood Capital Dayton Cedar Trail Apartments Oct-17 $6,150,000 132 $46,591 Cedar Trail Partments Llc Cedar Trail Lp Dayton Timberlake Apartments Nov-17 $5,250,000 144 $36,458 Timberlake Apartments Llc Miller-Valentine Group Dayton Willowood Apartments Oct-17 $4,360,000 124 $35,161 CommuniCare Health Services Absolute Property Solutions II LLC Dayton Country Club Apartments Jul-17 $21,800,000 316 $68,987 Monarch Investment and Management Group Apollo Property Mgmt Toledo Steeplechase Dec-17 $20,200,000 242 $83,471 Morgan Management Cumberland Construction Toledo North Towne Villas Oct-17 $6,272,600 145 $43,259 Bodie Investments The Whitehurst Company Toledo 2606 Pioneer Trail Jul-17 $4,581,000 181 $25,309 Readycap Commercial LLC Key Real Estate Ltd Toledo Dayton Source: Colliers Research, CoStar, Real Capital Analytics 3 Ohio Research & Forecast Report 2H Multifamily Market Outlook Colliers International
Market Takeaways In Cincinnati, supply outpaced demand during for the first time in three years pushing the overall market occupancy rate down 60 basis points to 95.7 percent. 2,366 units were added to the region s inventory during the year, approximately 1.3 percent of inventory. The pipeline remains full with over 2,090 units scheduled for delivery in 2018. Most of the projects are focused in the downtown and central submarkets. The trend of the highest occupancies in Class A product has reversed as new supply has been added to the inventory. Rent growth, which has increased above historical averages for each of the past three years, slowed during the year. The average monthly rent as of year-end was $904 per month, an increase of 2.7 percent over last year. As new supply is primarily focused on upper-end product in prime submarkets, affordability issues in these areas have pushed demand into Class B and C properties in working class submarkets, which in the past have lagged the overall market. Over the past two years, though, annual rent growth in these areas have averaged around five percent annually. With growing population in both the 55+ and 20- to 34-year segments, it is expected that construction activity will remain elevated for at least the next two years as these two key cohorts provide additional demand for apartments. The Cleveland multifamily market faces stiff competition from single-family home sales, which have enjoyed increasing levels of demand over the past five years. Cleveland s home ownership rate of 65.7 percent is 1.8 points higher than the national average and the region ranks as one of the nation s most affordable in terms of housing prices. However, lifestyle considerations have benefitted the Cleveland apartment market, especially in the downtown area where most new development and demand for apartments is focused. The two demographic cohorts driving demand, the 55+ and 20- to 34 year-old segments are the fastest growing groups in the metropolitan area. From a historical perspective, development activity remains elevated. 1,360 units were delivered in and 1,741 units are scheduled for completion in 2018. However, for the first time in three years, supply exceeded demand. The overall occupancy rate fell on a year-over-year basis by 40 basis points to 95.9 percent. But the market appears to be in balance with forecasts calling for construction activity to drop by 2019. Monthly rents average $889, an annual increase of 2.4 percent. In line with regional and national trends, the rate of rent growth has slowed after averaging 3.3 percent over the past 5 years. The Columbus market leads the state in inventory growth, adding 3,921 units during with another 4,800 scheduled for delivery in 2018. Demand of 4,150 units outpaced supply during the year pushing the overall occupancy up by 10 basis points to 96.4 percent. Population growth in the key demographic cohorts has generated outsized demand for apartments. Home to The Ohio State University, the nation s third largest university, the 20- to 34-year old segment is growing at nearly twice the national average. The 55+ cohort, the other driver for apartment demand, has also increased significantly. Additionally, Columbus is a renters market with a home ownership rate of 58.1 percent, nearly six points below the national average. All these factors point towards favorable conditions for multifamily for the near future. Currently at $899 per month and in contrast to national and regional the trends, rent growth has not slowed increasing by 3.5 percent during the same as the market s five year average. The majority of the new development is focused in downtown Columbus and the nearby University District. Elevated supply levels in these prime areas have recently resulted in some volatility in rents. It is forecast that demand will slow throughout 2018 and with the influx of new supply, occupancies will decrease and rent growth will moderate. However, stable conditions are expected to continue in the near term. 4 Ohio Research & Forecast Report 2H Multifamily Market Outlook Colliers International
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