RENTAL REPORT
Rent is going up, and apartment sales are strong in OKC
Renters struggled in 2020, but i n the Oklahoma City area they mostly kept their rent paid up, and it shows in the apartment sales data for the year. As “difficult and unpredictable” as it was, “the roller coaster ride may have been more emotional than financial,” said Mike Buhl, broker-owner of multifamily property brokerage Commercial Realty Resources Co. in Norman. “The effects of COVID-19 on the multifamily sector have so far proven to be more of an interruption than a trend. ... Renters have prioritized rent payments.”
Collections were l ar gelyunfaz ed, and rents are on the rise. Occupancies remain firm. With employment in recovery from the depths of the pandemic, and borrowing costs remaining historically low, investors kept coming, looking for property to buy, Buhl said inhis year-end apartment market report, available at http://www. crrc.us/.
“Demand for new units held firm through the end of 2020, vacancy rates remain near their 5-year low, and rents continue to appreciate. Overall job growth in the metro has fueled multifamily demand especially in primary employment nodes such as the Northwest submarket, according to
Capstone Cos. year-end market report by brokers Willi am Forrest, David Dirkschneider and Mike Marrara.
The struggles of the energy industry hardly touched the rental market, according to the Capstone report, which noted that while energy is responsible for 10% of earnings in the region, the sector accounts for just 3% of total employment.
And, the unemployment rate across all sectors, ended 2020 at 4.8%, well below the U.S. rate of 6.7%. “The metro has continued to attract more non-energy employers to the area, helping to diversify the tenant base and adding more stability to the economy. As a result, more people have begun to flock to the city, the unemployment rate has steadily declined, and job growth has remained near the national average,” Capstone reported.
Buhl tracked 35 sales of apartment complexes with more than 25 units, for a total of 5,114 individual apartments, down about 31% from 7,403 apartments in 2019.
Sales volume in 2020 was $404.6 million, down about 25% from $541.3 million the year before, Buhl reported.
Both were down, “but that's only because 2020 is being compared to such a record high year in 2019,” he said. “By historical standards, over $400 million in transactions is a solid year. ... Given our expectations back in April, the numbers for the year held up well, even increasing on a perunit basis.”
For 2020, the overall average price paid per unit for apartment communities with 25 units or more was$79,134, an 8%increase from $73,130 at the end of 2019, Buhl reported.
The year ended with metro-area apartment complexes 93.2% full and overall average rent up 2.2% over 2019, Capstone reported.
Buhl said strong occupancy and good collections are keeping Oklahoma City apartment properties in demand. The coronavirus pandemic has altered some of the inner workings of the investment market, however. “While there is general uncertainty, we have seen a pretty strong bounce back from the beginning days of COVID-19, with an overall positive sentiment around the sector, he wrote in the CRRC report. “Notwithstanding, there are still those investors trying to identify the owners that are going to be distressed enough to sell at a discount.
“What we have seen, though, is that owners are not upside down and there has been no mass repricing of assets or price erosion. Even those owners that might be experiencing some levels of distress are more motivated to hang on to their properties than to offer discounted pricing. COVID aside, the sentiment is that you must pay the price if you want to participate in the market. That is not great news for those opportunistic buyers.”