Investor interest in multifamily properties jumped 40% in the first quarter of this year, according to data released by Washington, D.C.-based CoStar Group.
CoStar Group reports that more multifamily deals closed during the first quarter than in any quarter since mid-2005, with approximately 4,000 transactions totaling $9.4 billion. In comparison, the same sector recorded $6.7 billion in transactions in the first quarter of 2010 and $3.76 billion in the first quarter of 2009.
Real estate investment trusts (REITs) and private equity firms were the primary buyers of multifamily properties, with REITs purchasing a total of $515 million in the quarter and private equity firms paying $117 million. Washington, D.C., and Los Angeles tied for the highest year-to-date sales volume at $900 million, followed by the San Francisco Bay Area ($600 million), Phoenix ($500 million) and Long Island ($400 million). The top five multifamily markets accounted for $3.3 billion, or roughly one-third of the total sales volume, and these markets collectively saw a 15% year-over-year increase in the first quarter.
Transactions on distressed properties – including real estate owned sales, deeds-in-lieu of foreclosure and properties with high vacancy and/or deferred maintenance costs – constituted approximately 21% of all first-quarter multifamily sales, down 5% from the previous quarter. Distressed properties accounted for 60% of all transactions in troubled markets such as Tucson, Ariz.; Fresno, Calif.; Jacksonville, Fla.; Atlanta; and Las Vegas.
