The apartment transaction market started 2015 off just as frenzied as it finished 2014.
In January, the sector posted $9.3 billion in sales, which was a 42% increase compared to January 2014. Both garden and mid- and high-rise sales contributed to the growth, increasing 40% and 46% year-over-year, respectively.
As sales increased, cap rates continued to fall, dropping 10 basis points to 6% in January. Both garden and mid- and high-rise cap rates fell, with garden hitting 6.2% (its lowest number since the recession) and mid and high-rise falling to 5%.
Outside of the year-over-year bump in sales, the real story might have been the increase in share by equity funds. In 2014, these funds only accounted for 9% of apartment acquisitions. In January, they captured 16% of the market on $1.5 billion in acquisitions.
Private investors accounted for 53% of volume on $4.9 billion of sales, which is down from their 62% of the market in 2014. In the four years before, private buyers only secured 51% of the market. Public buyers, who generally don’t want to employ as much leverage as private companies, lost share in 2014—falling to 9% of activity in 2014 versus 20% in 2013.
But public buyers did dominate portfolio activity, driven by the $4.3 billion Essex-BRE deal.
The public investors did differentiate themselves with respect to portfolio activity in 2014, but the figures here are really about M&A activity. Within the $10.0 billion universe of all public investor acquisitions, 65% of all activity was focused on portfolio acquisitions.