WINNING RECIPE FOR THE MULTIFAMILY SECTOR.

• Author: Bodnar, Patrick
• Position: MULTIFAMILY

Utah's robust multifamily sector in 2017 was recently validated by PwC and the Urban Land Institute Emerging Trends in Real Estate report, released in Q4 of 2017, wherein Salt Lake City was identified as the No. 2 location to buy multifamily real estate in the nation. With another record year of over 42 transactions of properties 50 units or greater totaling over $1.037 billion in sales, demand for Utah multifamily has been rightly confirmed. Interest from high net worth family offices, private equity groups and institutional investors is still on the rise, all wanting a piece of the "crossroads of the west". Investor interest is fueled by strong economic fundamentals and better yield spreads over neighboring western states markets. The greater Salt Lake area has been operating at near full employment throughout 2017 greatly contributing to the continued high numbers of people migrating to Utah for employment.

The Bureau of Labor Statistics data shows Utah ranked No. 2 in the U.S. for job growth at 2.7%. In addition, Utah is tied for No. 1 with Nevada for private sector job growth at 2.9%. Unemployment averaged 3.26% in 2017, well below the national average of 4.38%. These labor statistics have contributed to the healthy population growth of over double the national average at 2%. Mix in the dynamic of an incredibly accessible outdoor recreational lifestyle and Utah has a winning recipe for success in the multifamily sector, attracting the interest of capital from investors across the nation and around the globe.

Sales Volume/Transactions

Total multifamily transaction volume has reached an all-time high! 2017 realized 88 multifamily transactions totaling just over $1.151 billion for properties 10 units or greater. This represents approximately 8,227 units sold. Small market apartment sales (10 to 99 units), contributed 53 sales of approximately $152,415,000, and the large market (100 units and greater) realized 33 sales for a total volume of $913,673,212. The bulk of the total sales volume (44%) were from 8 Class A and B properties having greater than 200 units, each having sold for over $40 million at an average per unit price of $205,055.

Notable sales include The Park at City Center (330 units in Sandy), The Vue (211 units Salt Lake City), Bridges at Citi Front (359 units in Salt Lake City) and Lionsgate at Fireclay (400 units in Murray). These significant sales have aided in capturing the interest of an increasing number of institutional investment firms helping to build the greater Salt Lake area with a reputation as a preferred, Tier 2 market. These institutional firms value the presence of other, similar firms in the markets where they own product.

Pricing across the board was strong in 2017. The overall average price per unit was $145,220 and price per foot was $157 for all 100+ unit properties. Average unit pricing was $238,935 for Class A, $145,220 for Class B, and $111,087 for Class C. Although the Class A pricing reached new heights in Utah, close comparison to neighboring, western markets provides a clearer picture why the greater Salt Lake market area remains an attractive alternative for investors. Over the last two years the following markets have averaged, across all property classes, per unit pricing as follows: Los Angeles $396,978, Orange County $303,673, San Diego $322,143, Denver $244,846, Portland $252,777 and Seattle $281,320. The greater Salt Lake area Class A multifamily assets selling at an average of $238,935, provide the opportunity for investors to purchase product with state-of-the-art amenities at the same pricing levels as much older, Class B and C assets requiring more capital improvements and offering marginal amenities in...