Profimex Market Review Update – January 19, 2021
Apartment Developers Back Off From Land Buys
According to Real Capital Analytics (RCA), development side sales were down by surprisingly only 5% in 2020. However, the share of apartment developers, which accounted for around 44% in the last five-year, dropped to 22% on 12 months trailing through Q3 2020. Jim Costello from RCA, believes that this is not necessarily a result of COVID-19, but rather a broader trend that has started before, partly due to millennials moving out to the suburbs. To pick up on this trend, single-family houses could present opportunities in emerging suburbs. According to Chapin Bell, CEO of PB Bell, “If you are in the market looking for a single-family rental, it is relatively difficult to find because occupancy levels are so high. Millennials want the single-family experience with the benefit of a professionally managed and amenitized community.”
Special Servicing Rates Highlight Improving Conditions
According to Trepp, a big-data CMBS provider, the CMBS special servicing rate declined by 35 basis points to 9.81% in December, from 10.16% in November. This decline came mostly by hotel loans, which declined by 149 basis points in December, and retail loans, who declined by 27 basis points. As a result, the outstanding balance of distressed loans handled by special servicers decreased by $1.5 billion to $47.48 billion in December.