Class B&C Properties Gaining Value
Excellent one-pager from Multi Housing Advisors on the declining inventory (and therefore rising value) of the Class B and C apartments in many key cities. There has been a lot of talk lately about the surge of new construction, but that is almost exclusively Class A space. In fact, the actual number of housing units available in the B and C class has been decreasing in many cities due to poor maintenance and the fact that older buildings are being demolished to make room for higher priced Class A projects.
At the same time, the rising immigrant population and the large segment in general of Americans who are looking for a clean, affordable and larger apartment is growing.
As value players, PGP is constantly looking for B/C class buildings that can be well managed and thus stay fully rented over the long term.
From the article:
The majority of properties in the development pipeline are Class A assets with lavish amenity packages and steep rents. As a result, Class B/C properties are facing limited competition. In addition, rather than allowing their older Class A assets to slip into the Class B category, owners are upgrading these properties to take advantage of top-end rent lift. Finally, Class B/C competition is further limited as some owners are opting to demolish their Class C product in favor of new construction.
From an investor perspective, Class B/C assets have become prize properties as they are reporting lower vacancy rates, higher cap rates, and faster NOI growth than Class A. All of these factors - renter and investor demand, limited wage growth, and minimal competition - contribute to an ongoing favorable outlook for Class B/C assets.
Full article here: http://usmha.com/pdf/MHAClassBCSeptember2015.pdf