Mark Jensen and Greg Ratliff of ARA, A Newmark Company, recently released their 2017 Multihousing Market Report. The following is an overview the multihousing market in Utah.

Moving into 2017, the Utah multifamily housing market continues to be robust. Since 2010, there has been a continuous rise in both sales volume and values. For example, Multifamily sales volume in 2015 was up 330% compared to 2010. Property values increased 8.6% annually since 2009. The market is changing and many of those changes began to manifest in 2016.

Volume and Pricing

Transaction volume is a key indicator to determine the market, and volume in 2016 decreased. In 2015, Utah experienced the largest transaction volume year ever seen in multi-family investments – 55 transactions totaling $703,240,988 and 3,451 units traded. In 2016, 41 transactions totaled $644,038,988. A lack of available product, legacy debt needing to be assumed, and increased pricing expectations have lowered 2016 volume versus 2015, albeit only a slight decrease overall.

2015 was a huge year for dollar volume, and though slighty down in 2016, a steady increase of price per square foot that has been trending since 2012 continued into 2016 -; with it a 13.5% increase YOY for the last 2 years, placing 2016 at $139.16 PSF YTD.  While volume has been down, it is not a representation of where we are in the market, as demand remains very strong.  Less has truly meant more for clients as demand far outweighs supply, and buyers are willing to pay more for long-term upside and capital preservation in the Utah market.

Cap Rates & Transaction by Year Built

2012, saw the most deals completed in the last 5 years, with the vast majority of deals being B & C assets. Moving into 2013, some of the recently constructed projects spin off and sell and peaked in 2014. Currently pricing sensitivity in A product is clear as the expectation of rental increases in Class A space goes down and buyers move into the value-add B & C assets again in a big way.  

The full report is available at www.ngacres.com/market-research.