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Top 5 Trending Topics of Middle Market Forum- West

1.        Compressed cap rates in major markets; Large companies are now starting to compete in the secondary markets showing interest to explore investments outside of traditionally hot core.  As rents and sales prices at those core markets are reaching a plateau, investors seem willing to entertain slightly lower returns because of the reduced risk profile associated with not chasing top of the market rents or sales price.  This makes the middle market investors relationship with local Brokers and governments along with extensive market knowledge an advantage to this new competition.  

 

2.       Development vs. purchasing value add properties; As construction costs rise faster than rent growth, redevelopment and rehabs ROI analysis plays a key role in determining value of acquisition.  Urban infill projects close to employment hubs and rapid public transit markets have faster rent growth, where the secondary or tertiary markets show better ROI with light renovations or rehab program.

 

3.       Value add opportunities are very diverse; From interiors to common areas, owners are getting creative.  From common area repurposing to creating four-bedroom student housing out of conventional two bedroom properties.  Dog washes, common area coffee bar lounges get repurposed from traditional clubhouses and utility closets.  More thought is put into bringing the luxury amenities to vintage properties.  Unused common areas turn into useful space for residents at a very low cost. 

 

4.       Diversify Real Estate; A growing number of middle market owners are purchasing manufactured home parks, student housing, creating property management support software, single family homes and community associations to their portfolio.  The broad level of owned assets support owners/investors during market changes and offer more value during cycle changes.

 

5.       KNOW YOUR MARKET; Relationships with the local governments, Brokers, knowledge of local employment growth potential is key.  Slow and steady growth and value in all times within the cycle is primary goal for most organizations. 

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