Salt Lake multifamily market stays strong

According to a report from investment brokerage ARA, A Newark Company, Utah’s multifamily housing market will continue to be robust into 2017. Salt Lake ARA managers Mark Jensen and Greg Ratliff recently released the firm’s “2017 Multihousing Market Report.”

ARA is a nationwide company that focuses exclusively on the multi-unit housing market.

The following is an overview the multifamily market in Utah, according to the report:

Moving into 2017, the Utah multifamily housing market is expected to be strong. Since 2010, there has been a continuous rise in both sales volume and values. For example, multifamily sales volume in 2015 was up 330 percent compared to 2010. Property values increased 8.6 percent annually since 2009. The market is changing and many of those changes began to manifest in 2016.

Volume and Pricing

Transaction volume is a key indicator to determine the market and volume in 2016 decreased. In 2015, Utah experienced the largest transaction volume year ever seen in multi-family investments — 55 transactions totaling $703,240,988 and 3,451 units traded. In 2016, 41 transactions totaled $644,038,988. A lack of available product, legacy debt needing to be assumed and increased pricing expectations lowered 2016 volume versus 2015, albeit only a slight decrease overall.

The year 2015 was huge year for dollar volume, and though slightly down in 2016, a steady increase of price per square foot that has been trending since 2012 continued into 2016 and with it a 13.5 percent increase year-over-year for the past two years, placing 2016 at $139.16 per square foot year-to-date.  While volume was down, it is not a representation of where the market stands as demand remains very strong, the report said. Less has truly meant more for clients as demand far outweighs supply and buyers are willing to pay more for long-term upside and capital preservation in the Utah market, it said.

Cap Rates & Transaction
by Year Built

In 2012, the most deals were completed in the past five years, with the vast majority of deals being Class B and Class C assets. Moving into 2013, some of the recently constructed projects were sold with that activity peaking in 2014. Currently pricing sensitivity in Class A product is clear as the expectation of rental increases in Class A space goes down and buyers move into the value-added Class B and Class C assets.