What’s the One Element Everyone is Searching for in Multifamily?

|BY levercp

By: Adam Horowitz, Principal, Lever Capital Partners

Do you want to live and work near public transit? I certainly do, and so do many others, including a majority of millennials. As George Bluth said, “there’s always real estate money in the banana stand.” OK, he didn’t say the real estate part, but you get the idea. Populations worldwide are moving closer to urban centers – the United States is no exception. It’s happening everywhere, but nowhere is it more prominent than in the so-called 18 hour cities where public transit used to be an afterthought. The impact is large, as we see more investment dollars being used to build multifamily and office properties near transportation alternatives.

One of the main reasons we are beginning to see this transition is that Millennials and Gen Zs are ditching cars at a fast clip and have to get around somehow. So, it’s either stay landlocked in the suburbs or move to more urban neighborhoods with good transportation options. Who wants to sit in traffic in Atlanta, Boston, or Los Angeles when you can walk to work then meet friends or family easily at the end of the day before heading back home lickety-split.

This is taking place across the United States. True 18-hour cities like Denver, Nashville and Dallas are offering the amenities of the Big 6 Cities, at a fraction of the cost, with a growing set of public transportation options. Secondary cities such as Denver and Minneapolis-St. Paul has extensive light-rail systems, which have a very high usage rate. These cities are less expensive to live in than New York City, Chicago, and Los Angeles, which are all seeing residents leaving at an alarming rate.  

Developers are smartly capitalizing on the desire of people wanting to live, work, and play within short distances of each other. Being in these locations also allows them to achieve cap rates similar to their central business district counterparts. Research shows, “public transit’s benefits go beyond moving people from point A to point B. Transit creates value and, as a result, influences development and business location decisions (NREI).” Consequently, equity investors are focusing on mass transit and “walk scores” much more than in previous years. As usual, the smarter real estate groups will “follow the money” so, if that’s where the equity dollars desire to go, then that’s where they’ll build.

All in all, this is a positive move for our changing population. People are moving closer to cities and want access to live, work, play environments. Secondary and tertiary markets are in higher demand due to their available transit options. The more demand for these projects results in lower cap rates and more equity investor interest. 

We’re Here to Help

At Lever Capital Partners, we have seen a large amount of projects needing debt and equity capital for projects in close proximity to transit. Whether your project is missing guarantors, GCs, or local sponsors, we can help fill in the gaps. To learn more about these trends and how they might affect your business, or if you have questions regarding a commercial property, reach out and we’ll evaluate your project.