Marcus & Millichap

Green Bay/Fox Valley Multifamily Research

Green Bay/Fox Valley, Second Half 2016

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Steady and Reliable Apartment Sector Fueling Interest in Green Bay

Accelerating rental demand driving new construction. Steady job creation and a lower cost of living are driving a tight apartment market in the Green Bay to Fond du Lac area. Strong demand for apartments has held vacancy down and encouraged healthy rent gains. The average effective rent has increased for six consecutive years, rising by more than 3 percent annually on average as vacancy has fallen 240 basis points since then end of 2010. A shortage of available units has driven developers to elevate construction activity over the last two years, targeting the areas of Appleton and Fond du Lac. Nearly half of completions over this span have been brought online in these areas. While several large developments are underway across the metro, the majority of projects under construction in these areas contain fewer than 100 units. Over the last four quarters, leasing momentum has been strongest in Green Bay and Appleton, holding vacancy below the market average. Robust operations will extend through the rest of this year as more residents fill newly available rentals, compressing the vacancy rate and boosting the average effective rent.

Motivated buyers search for yield. Private equity investors have become increasingly active in the Green Bay/Fox Valley area, pushing deal flow to the greatest levels recorded this cycle. The buyer pool is growing as demand for higher returns and stable cash flows fuels interest in tertiary markets. As competitive bidding places upward pressure, particularly on Class C assets, more listings are being brought to the market to take advantage of this demand. Many owners are using this opportunity to reposition their portfolio, exchanging built-up equity into larger properties as debt remains relatively inexpensive. Activity has been widespread for multifamily assets, with increased focus on the Central Green Bay/Fox Valley area. Going-in cap rates are in the mid-7 percent territory, while new construction can sometimes reach the 6 percent band. In the outlying areas of the region, cap rates average 50 basis points higher to the low-8 percent range.

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