Third Quarter Multi-Family Market Report 2014

Third Quarter Multi-Family Market Report 2014

National Economy The national economy is improving as it continues to the fourth quarter of the year, mainly driven by the sales of motor vehicle, business equipment, exports and nonresidential construction. The third quarter s economy reached around 3.5 percent at an annual rate according to the Department of Commerce. Kiplinger s Economic Outlooks states that during the fourth quarter and into 2015, the annual GDP growth rate will settle down to a 3.0 percent rate and the growth rate is expected to accelerate through 2015. The national unemployment rate reached 5.9 percent at the end of the third quarter of 2014 and Kiplinger s expects the unemployment rate to bounce around 6 percent for a while gradually declining to around 5.6 percent by the end of 2015. Despite the increase in hiring and the decrease in unemployment, which indicates that the economy has recovered to full health, there is a debate regarding the health of the United States job market. Many people have stopped looking for jobs. There are 7.3 million people who want full time jobs but can only find part time jobs, and there are many people waiting for an increase in their paycheck. These raised concerns might hold off the Fed from raising the short-term interest rate, while most economists still believe the first interest increase will be in mid-2015. Local Economy The most recent updated unemployment rate reported by the Department of Labor is 4.4 percent during the third quarter 2014 despite the slight increase of the Oklahoma State unemployment rate, which reached 4.7 percent. A local newspaper states the biggest job gain in the Oklahoma City metro area is in the mining sector, which includes energy, and the largest job losses were in the government sector. The low living costs and business costs always make Oklahoma City an attractive place to invest. In July, Nerdwallet ranked Oklahoma City the No. 1 Best City to Launch a Startup based on access to funding, labor and the cost of living. Forbes also ranks Oklahoma City as the No. 7 Best Place for Business, and they highlighted Oklahoma City s outstanding job and income growth over the past five years.

Oklahoma City Market Multi-Family Sales The statistics to the right are a comparison between the second and the third quarter s multi-family sales transactions. It indicates that the third quarter s sales volume is much higher than the second quarter. The largest sale transaction based on sales volume is a 324-unit multi-family property known as Liberty Pointe, which is located at 6600 SE 74th Street. 2014 q2 2014 q3 Number of Transactions 11 12 Total Sales (Dollar) Volume $23,831,000 $77,171,000 Total Units 862 1,336 Average Price $2,166,455 $6,430,917 Average Price Per Bldg. SF $31.85 $60.22 Average Price Per Unit $27,646 $57,763 Median Price Per Unit $32,292 $37,936 Weidner Apartment Homes from Kirkland, WA purchased the facility from Gardner Tanenbaum Holdings in Oklahoma City, OKC for $37.25 million or $114,969 per unit on September 22nd, 2014. Apartments close to school campus are always popular properties for investors due to their low vacancy rate and high cap rate. A couple of multi-family properties sold during the third quarter located in Norman and Edmond that were close to the university campuses. Delivery & Construction There were 1,658 units totaling 1,692,826 square feet of multi-family space under construction at the end of the third quarter of 2014. The two projects with the most rentable building area is a 241-unit, 319,000 square foot property located at 605 Southwest 119th Street in Oklahoma City and a 327-unit, 313,920 square foot property located at 1111 North Shartel Avenue in Oklahoma City. It is expected that 1,095 units totaling 1,255,209 square feet of multi-family space will be delivered in the fourth quarter. Detailed information regarding the apartments expected to deliver during the third quarter can be found in the following table: Building Address Delivery Time City Rentable Building Area Number Of Units 605 SW 119th St Oct-14 Oklahoma City 319,000 SF 241 900 NE 122nd St Oct-14 Oklahoma City 253,936 SF 324 1325 NW Walker Ave Oct-14 Oklahoma City 271,760 SF 250 600 S Country Club Nov-14 El Reno 177,903 SF 60 321 N Oklahoma Ave Dec-14 Oklahoma City 70,000 SF 97 19501 N Pennsylvania Ave Dec-14 Edmond 162,610 SF 123

Proposed Multi-Family Projects Building Address Break Ground Time City Rentable Building Area Number Of Units 6 NE 4th St Oct-14 Oklahoma City 128,000 SF 160 2500 N Broadway Oct-14 Edmond 15,000 SF 27 400 N Shartel Ave Oct-14 Oklahoma City 188,000 SF 235 3700 W Tecumseh Oct-14 Norman 150,000 SF 200 NE 6th St & N Oklahoma Av Nov-14 Oklahoma City 300,000 SF 330 505 E Sheridan Ave Dec-14 Oklahoma City 211,650 SF 250 Couch Dr @ Lee Avenue Jan-15 Oklahoma City 35,000 SF 32 1201 N Francis Jan-15 Oklahoma City 20,000 SF 43 Oak Ridge Dr @ 2nd St Jan-15 Edmond 50,000 SF 20 S Portland Ave Oct-16 Oklahoma City 102,400 SF 128 There were 1,425 units totaling 1,200,050 square feet of multi-family space proposed at the end of the third quarter of 2014. The majority of the proposed multi-family projects are located in the downtown area due to the high demand. The downtown market is so hot that both the Indianapolis-based Milhaus Development and Chicago-based Clayco have proposed high-rise apartments, competing for the south half of the OG&E future headquarters. Oklahoma City Market Multi-Family Leasing The two chart below show the vacancy rate and the average asking rental rate per unit for the multi-family properties in the Oklahoma City area. The vacancy rate fluctuated slightly throughout the past six years, but showed a decreasing trend in general. The vacancy rate stayed stable through the first three quarters in year 2014. The average asking rental rate per unit shows an increasing trend at a decreasing speed during the past six years. The asking rental rate per unit has increased from approximately $600 to around $680. This is due to the recovery from the economic depression increasing the rate of new apartments delivered to the market. Vacancy Rate Rental Rate per Unit Cap Rate The chart on the left shows the cap rate for overall multi-family properties in the Oklahoma City market. It has fluctuated significantly throughout the past six years, with an average cap rate around 9%. The third quarter ended with a cap rate of 9.10%.

Oklahoma City Market Multi-Family Leasing Vacancy by Unit Mix Asking Rent by Unit Mix Absorption, Deliveries and Vacancy As is shown on the Vacancy Rate by Unit Mix chart and the Asking Rent by Unit Mix chart, all types of unit mix apartment s vacancy rates show a decreasing trend until the mid-year of 2013, and the vacancy rate slightly climbs after mid-2013. All types of unit mix apartments rent gradually increased during the past six years. We can see in the chart below that deliveries and absorption are well balanced and we will continue to see great demand for residential units in the CBD especially as continued development will bring additional workforce to the CBD. This continues to be a very active market for developers and investors and we will see both rental rates and price per square foot of sales continue their upward pressure. The areas around college campuses and Health Science Center are also very attractive and in high demand.

OKC Market Significant Multi-Family Sale Transactions during the Third Quarter 2014 Name: Liberty Pointe Address: 6600 SE 74 th Street, OKC Sale Price: $37,250,000 Price/SF: $127.49 Price/Unit: $114,969 Sale Date: 9/22/2014 Name: Westwood Park Apartments Address: 1836 W Robinson Street, Norman Sale Price: $16,050,000 Price/SF: $64.12 Price/Unit: $62,451 Sale Date: 08/26/2014 Name: Boulder Ridge Apartments Address: 8501-8557 Candlewood Drive, OKC Sale Price: $9,500,000 Price/SF: $28.58 Price/Unit: $28,963 Sale Date: 9/12/2014 Name: Warehouse Flat Address: 1325 W Lindsey Street, Norman Sale Price: $1,800,000 Price/SF: $104.11 Price/Unit: $54,545 Sale Date: 9/29/2014 Name: Peach Tree Village Address: 110 E. Peachtree Ter, Mustang Sale Price: $1,650,000 Price/SF: $36.91 Price/Unit: $38,372 Sale Date: 9/9/2014 Name: The Market Address: 600 N.W. 29 th Street, OKC Sale Price: $1,350,000 Price/SF: $56.21 Price/Unit: $42,188 Sale Date: 8/29/2014

NAI Sullivan Group NAI Sullivan Group is a leading global service provider offering a full range of premier services, customized to fit your need and exceed your expectations. Our talented and experienced professionals provide benefits to large institutions and small business owners alike. We are your single point of contact for customized real estate services. NAI Sullivan Group strives for excellence in all facets of real estate services in order to maintain our position as an industry leader. Our team transforms forward thinking ideas into cutting edge applications, to achieve maximum results for our clients, company, and community. Whether around the corner or around the world, NAI Sullivan Group is a dynamic member of NAI Global, the world s leading managed network of commercial real estate firms. With over 6,700 professionals, more than 375 offices and over 380 million square feet of properties managed. We bring together people and resources to deliver results for our clients wherever needed. Our clients come to us for our extensive knowledge. They build their businesses on the power of our global managed network. NAI Sullivan Group provides a complete inventory of office, industrial and retail properties, including those that are fully occupied. It contains thousands of details on every facet of every building tracked. Also, NAI Sullivan Group provides detailed information on all contacts and companies in various markets. REALTrac Online is NAI Global s Web-based transaction management software, which helps to coordinate projects and facilitate the transaction cycle. REALTrac enables the Buyer, the Seller, the Lessee and the Lessor to view online the progress of their transaction. STARS is an acronym which stands for Strategic Transaction Administration and Reporting System. STARS is NAI s proprietary system for providing a time line of events to clients in transactions. NAI Sullivan Group is a leader in the adoption of new technologies to improve business operations as a means of speeding communications, optimizing performance, delivering the highest quality services to clients and facilitating the sharing of best practices among our brokers. NAI Sullivan Group has launched a new application for the ipad and iphone. This app is free of charge and is available for download in the Apple App Store under NAI Sullivan Group. Clients can use the app to review all our company listings, find agent contact information, perform calculations, review our current market reports and much more. This app allows a client to simply take a photo of the property they are interested in and their request will instantly be submitted to the sales associate of the client s choice and the associate will contract the client with details of the property in question. CoStar Group is the primary provider for commercial real estate information, analytics and marketing services. CoStar conducts extensive on going local market research to produce and maintain the largest and most comprehensive database of Commercial Real Estate information. Their online services enables the sales associate to analyze, interpret and gain unmatched insight on commercial property values, market conditions, and current availability. LoopNet, Inc., is one of the leading information service providers to the commercial real estate industry; it delivers a comprehensive suite of products and services to meet the national and local needs of commercial real estate firms, organizations and professionals. LoopNet members can list, search, market, research and finance commercial real estate properties over the Internet. For more information, please visit our website: www.naisullivangroup.com Resources mainly come from CoStar, The Oklahoman, and The POINT. Download the NAI Sullivan Mobile App FREE from the App Store!