Though optimism is spurring new multifamily construction, access to capital is handcuffing new construction, especially in secondary and tertiary markets
Only 17 percent of multifamily firms reported that capital is available for all property types in all markets. By contrast, 36 percent said it is constrained in secondary and tertiary markets and 34 percent said it is constrained for all properties other than top-tier ones – even in primary markets according to the Quarterly Survey of Apartment Market Conditions by the Multifamily Housing Council.
The MHC’s Debt Financing Index declined to 65 from 74. As the only index that dropped below 50 in the past nine quarters (48 in Q4 2010), borrowing conditions continued to improve for the industry. Just four percent believed conditions worsened from last quarter, compared to 34 percent who reported improving conditions.
The Equity Financing Index grew slightly to 62 from 60. One third of respondents reported quarter-to-quarter equity financing as more available, compared to nine percent reporting less availability.
The Market Tightness Index increased to 74 from 60. Nearly half (49 percent) reported tighter markets – reflecting lower vacancy rates and/or higher rents – compared to only one percent reporting looser markets.
“The strength of the sector’s recovery has attracted capital to the industry,” said said NMHC Chief Economist Mark Obrinsky. “But our latest survey finds that capital is largely targeted at top-tier properties in core markets and not widely available throughout the U.S. Fully 79 percent of respondents said capital was constrained either by property type, by market or both.”