Tight occupancy, historically low loan rates, increased investment sales and record prices are setting the stage for an apartment building boom in the Oklahoma City area.
That's according to Commercial Realty Resources Co., multifamily property brokerage based in Norman. CRRC's midyear apartment report said that 2012 will be a “benchmark year” for core apartment properties in both Oklahoma City and Tulsa.
Recovery in the multifamily investment market is “entering a new phase,” the culmination of a decade-long downward trend in vacancies and recently renewed strong investor interest, according to the report, compiled by broker-owner Mike Buhl in CRRC's Norman office and broker Darla Knight in Tulsa.
“While underlying apartment fundamentals have been good, historic low interest rates have been better and have created a rare window of opportunity for some sellers,” Buhl said. “Furthermore, the unbalance in supply and demand, coupled with a very low interest rate environment, is fueling the next building boom in Oklahoma City and Tulsa, something that is now in the beginning stages.”
Investment sales improved the first half of the year no matter how defined:
In Oklahoma City, CRRC recorded 8 percent more apartment property sales through June compared with the first six months of 2011, with an average price per unit 180 percent higher, total number of units sold 36 percent higher and total value of properties sold 282 percent higher.
In Tulsa, the number of apartment property sales was up 225 percent with an average price per unit 49 percent higher, total number of units sold 245 percent higher and total value of properties sold 414 percent higher.
In Oklahoma City, most of the apartments sold so far this year were built in the late 1990s or later: Six sales totaling $210 million, compared with $28.8 million in the first half of last year, averaged $106,432 per unit.
Two involved student-oriented apartments near the University of Oklahoma campus at Norman: The Reserve on Stinson, with 612 beds, which sold for $112,488 per unit; and the 644-bed Cottages of Norman, which sold for $193,103 per unit.
Buhl wondered whether the high prices were too high.
“Have these record sales pushed the prices for top-tier properties high above the market? Some skeptics would say yes,” he said. “They theorize that pent-up demand driven by the availability of capital and historic low interest rates are pushing values higher and not the fundamentals themselves, making it difficult for these high prices to deliver acceptable returns for investors.”
Buhl said investors are pricing future rent growth, based on presumed sustained strong renter demand, into their buying calculations, creating an “extreme” pricing trend and “a rare window of opportunity for sellers.”