Investors Looking Past Apartment Craze for Higher Yield Options

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Investors seem to finally be withdrawing from the apartment complex craze that enjoyed steady returns for the past several years. Several real estate studies and surveys show that as apartment rents and occupancy growth tapered off in the face of new supply, owners of multifamily properties considered selling assets or diversifying portfolios with other property types. Craig Barrett, co-founder of NBI Properties, Inc. in Fort Walton Beach, Florida, said that investors on the Emerald Coast are looking for higher yields and occupancy stability.

“We’re not seeing investors getting out of the apartment and condo market entirely as much as they are interested in other options,” Barrett said. “The market has remained strong even with the challenges of new supply and a wave of new construction."

Barrett added that office, retail and professional buildings are a few types of properties that investors are calling him about, in addition to premium waterfront properties in the area. He noted there is a lot more opportunity in terms of pricing, occupancy and rent upside in some of the other property types such as office and retail space where investors still have the ability to potentially pursue development and value-add deals and some core deals as well.

"We believe the demand for apartments will remain steady because demand is still high,” he added. “But there’s so much new apartment supply right now that’s causing vacancies to go up. With office space, it’s a lot more difficult to obtain financing for office construction. However, with office jobs increasing, vacancy compression and less construction, the office sector seems like a safer haven for many investors."