M-F Northeast Investments Going Strong

The latest Sunrise Northeast multi-family rental market report reveals that as smaller Northeast cities reinvent themselves as centers for learning and technology innovation, investors are flocking to these areas for solid investments.
Holland

Jesse Holland, Sunrise

The latest Sunrise Northeast multi-family rental market report reveals that as smaller Northeast cities reinvent themselves as centers for learning and technology innovation, investors are flocking to these areas as solid investments.

“Investing into smaller markets in the Northeast may provide high yields in the future,” Jesse Holland, Sunrise Management & Consulting’s president and author of the report, told Commercial Property Executive. “With secondary markets, the highs aren’t as high and the lows aren’t as low, and they are much more stable.”

Holland singles out Albany, N.Y., Providence, R.I. and Stamford, Conn., as three areas on the Northeast, which are attributing strong numbers and the report supports his theory that moving into certain smaller markets in the Northeast may provide high yields in the future.

“There are a lot of strategies in play. For a long time, everyone was doing the same thing and struggling and being more defensive, but what we’re seeing now is a reflection point that people are pushing rents hard and some are going for head count and being more defensive on rental increases and trying to meet occupancy,” he said. “Everyone over the last four to five years has played the expense game and done everything they can to cut expenses.”

The cities in the Northeast are growing in part because of steady recovery and urban reinvention. The report showed that monthly rents in the Capital Region edged up 1.4 percent over the past year to an average asking price of $1,307.10.

Holland mentioned that Albany has reinvented itself as a city of innovation in technology and healthcare, which attracts young, high earners. Albany was also among the smaller cities identified by JLL’s Cities Research Center as part of the global 300 hotspots for growth and future real estate opportunities.

“Albany has seen tremendous economic growth stability because of its technology sector, which has been spreading across New York State,” Holland added. “Because local growth has been conservative, and our population and economy continue to grow, we are expecting a continuation of this trend.”

According to Holland, secondary markets are also becoming more attractive to institutional guys, especially in Albany.

“They are seeing better returns and larger returns,” he said. “You may be finding a 4 cap in New York City, but not much of a premium, but if you look at the Albany market, you are seeing 6-7 percent returns going in, and that’s very attractive in today’s environment. The stable growth pattern Albany is exhibiting should continue to attract industrial investors from outside the area.”

Other New York cities that Holland recommended to keep an eye on in the foreseeable future are Saratoga, Troy and Schenectady.

“A number of private developers are redeveloping downtown Troy. Really anything in the capital region of Albany and the Saratoga corridor is strong,” he concluded. “Big institutional players are taking a strong hard look at all these areas, where 10 years ago, it was all local players.”

The results of the study were collected by a research team at Sunrise Management & Consulting from a survey of more than 1,900 apartment communities, representing more than 300,000 apartment units.