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Louisville Real Estate Market: Trends and Opportunities in 2014

Explore the economic forecast for the Louisville real estate market in 2014, including transactions, new supply, capital markets, and strategies for success. Learn about market responses, debt strategies, fundamentals, and growth trends.

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Louisville Real Estate Market: Trends and Opportunities in 2014

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  1. 2014 Real ESTATE ECONOMIC FORECASTJanuary 30, 2014 • Steve LaMotte Jr., Senior Vice President • Dave Lockard, Senior Vice PresidentDane Wilson, Senior Associate

  2. Agenda • 1. Louisville Fundamentals • 2. Transactions • 3. New Supply • 4. Capital Markets Overview • 5. Strategies & Opportunities for 2014

  3. Capital Markets Overview

  4. Hold-Sell Dilemmas dominate seller thinking

  5. RISK PREMIUMS • Louisville MSA Cap Rates to 10-Year UST at Time of Sale

  6. Market response to rise in interest rates • Class A • Tracking $7 Billion / 135 Multi-Housing deals • 88 Class A • 20 out of 135 Requested Price Adjustment • 9 out of 20: Price Adjustment Requested, Seller Declined; Still Transacted • 8 out of 20: < 2% Price Adjustment • 2 out of 20: 2% - 4% Price Adjustment • 1 out of 20: > 4% Price Adjustment

  7. Debt strategies in a rising interest market • Move Down the Yield Curve • 10 Year Rate: 5.33% • 7 Year Rate: 4.78% • 5 Year Rate: 4.21% • Floating Rate (Capped ARM): 3.52% • 7 Year Float to Fixed: 4.20%

  8. Louisville fundamentals

  9. employment Current Unemployment Rate Total Number of Jobs U.S. 6.7% Louisville 7.3% Kentucky 8.2% National & State Unemployment as of Dec. 2013 Local Unemployment as of Nov. 2013 *November 2013(P) Source: Bureau of Labor Statistics

  10. Population growth • Louisville MSA 2.9% 1.9% 10.5% Source: CBRE

  11. household growth • Louisville MSA 3.2% 2.1% 11.2% Source: CBRE

  12. Owner-occupied housing trends • Louisville MSA Source: CBRE

  13. Market-wide Rents & Occupancy • Louisville MSA

  14. Top-20 Properties Rents & Occupancy • Louisville MSA

  15. transactions

  16. “A” Grade yield expectations

  17. “A” Grade transactions, 2013 Orchard Hills 373 Units Seller: Icon Properties Buyer: Bluestone Southgate 256 Units Seller: Inland Group Buyer: Paladin Realty Partners

  18. “B” Grade transactions, 2013

  19. Louisville sales volume * *2010 includes the partial interest sale of The Province

  20. “A” & “B” CAP RATES * *No “A” grade sales in 2008

  21. new supply

  22. New supply

  23. New supply • Louisville MSA

  24. Building permits • Louisville MSA

  25. New supply

  26. New supply

  27. New supply

  28. New supply

  29. New supply

  30. New supply

  31. New supply

  32. New supply

  33. Strategies & Opportunities for 2014

  34. Strategies & opportunities • Loan assumptions en vogue • High demand for well-located value-add andbest-of-class • Secondary/tertiary markets looking more attractive • Emergence of the pre-sale • Highly amenitized, high rent supply continues • We’ve hit maximum sustainable occupancies • The window is open but…

  35. For more information regarding this presentation please contact: CBRE Indianapolis-Cincinnati Multi-Housing Group • www.cbre.com/mhgindianapolis icmhg@cbre.com

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