One of the US's bigger CRE debt placers has a warning about multifamily: Be careful we don't outprice our customers.
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Apartment rents in Miami have to be watched for threat of losing renters to homeownership, declared FM Capital's Aaron Kurlansky (right).
“You have to be careful,” Aaron said. "You'll lose people to homeownership and what prices people can actually afford."
A newly constructed, 1k SF apartment unit can go for $3/SF. At $3k/month, that's the equivalent of owning a $500k home. “Everyone is pro forming tremendous rent growth, but at some point there's an affordability issue.”
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Aaron's comments came during our Miami Capital Markets & Foreign Investment event last week. Aaron was part of our capital markets panel that included Rivergate KW Residential/Eden Multifamily's Jay Massirman (who moderated); CBRE's Christian Lee, who leads the firm's institutional capital markets group; Aztec Group's Jason Shapiro; Wells Fargo's Scott Primeau; and Avison Young's David Duckworth.
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On the other side of the CRE world, office rents could be heading for a renaissance, Christian (right) told our audience of more than 150 CRE pros. Even as rents rise, they're still on average well below the previous peak for office space.
“Rents are cheap for office today,” Christian said. "I believe there's tremendous opportunity for office rent growth."
And as office rents in Downtown Miami climb higher, Christian says more companies will look to suburban office for affordable options. “Not everybody can afford to be downtown," he added.
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Scott (left) notes that institutional private equity players like Starwood Capital and Blackstone are surging forth in the debt market as mainline banks pull back on commercial real estate lending.
“They don't have necessarily the same hurdles in compliance that we have,” Scott says. “The first time in my career, the last 12 months, regulation and compliance have really affected our day-to-day job. It was always there, but it wasn't driving some of your decisions. It wasn't making closing a loan that much more difficult.”
As for a Donald Trump presidency, our capital panel diverged on opinions for various reasons. Here's a sampling:
Jay: “He's a real estate guy. Smart. He's a Wharton [School of Business] guy. He's going to try and maybe protect us in some way, shape or form. I'm optimistic.”
Chris: With his proposal to get rid of carried interest provision in the tax code, “that doesn't sound like he's taking care of his boys exactly.”
Scott: “He clearly panders to no one. At this point, he doesn't even know which direction he's going."
Aaron: “Having a developer in the White House is probably better than the alternative, but who knows?”
Scott: “I think it's going to be really choppy for a while.”
David: “I just think he's going to make a lot of flashy headlines. He's going to try to do a lot of things that sound great.” But David questions how many of his proposals he'll really be able to pass through Congress.
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