Raleigh-Durham YEAR END MULTIFAMILY MARKET REPORT

Raleigh-Durham2020 YEAR END MULTIFAMILYMARKET REPORT

The impact COVID-19 had on market rental rates was evident in 3Q 2020 as rent growth actually declined from 2Q levels. The market was able to finish out 4Q 2020 with a positive 0.7% year-over-year rent increase heading into 2021. As the pandemic has forced many renters to more affordable options, the Raleigh-Durham submarkets that have seen the most organic rent growth have not been in the central business districts, but rather on the outer lying edges of the market. The Far North Raleigh submarket was ranked 1st for annual effective rent growth of 5.1% followed by Southeast Raleigh at 3.9%, Northwest Raleigh at 2.8% and Northeast Raleigh at 2.4%. Similarly, the submarkets that struggled to maintain their historical rent growth were Northwest Durham/Downtown, Central Raleigh and North Cary/Morrisville, which all saw negative percentages year-over-year.

Despite a rocky year for rent growth in the market, the rental forecast for the next four years remains very optimistic. Projections through 2024 reach 3.3% annual growth. These figures show the confidence of Raleigh-Durham as a whole and indicate a near term recovery of rent growth.

Rent

The Raleigh-Durham multifamily sector rounded out 2020 on a very positive note indicating favorable metrics heading into the new year. After a rocky first half 2020, rent growth in the market finished flat with outlooks for the next three years trending positive. Apartment sales also climbed out of a mid-year slump to make total transaction volume in the region over $2.4B. Despite government shutdowns and regulations, apartment occupancy and collections in the region have remained steady. With the rollout of the vaccine across the nation and indications of the pandemic slowing, collection figures should remain steady in the near future. Despite multifamily fundamentals not being able to outpace 2019 levels, the Raleigh-Durham market has fared much better than other metros around the United States. Similarly, according to an annual poll by the Urban Land Institute, strong demographics and continued growth in the region have poised Raleigh-Durham as the #1 market in the United States for best real estate prospects. The region has been in the top-3 for a few years and has now risen to the #1 spot in front of Nashville and Austin. In all, the Raleigh-Duham market. Multifamily especially is positioned to be another dominant asset class in the region heading into 2021.

Overview

Raleigh Durham Market Metr ics as of 4Q 2020

Effect ive Rent . Eff. Rent/SF

QTQ % Change

TTM % Change Vacancy Supply Demand

Market $1,176 $1.22 -0.30% 0.70% -4.70% 5872 5092

Central Raleigh $1,209 $1.31 -0.80% 0.15% -5.00% 1192 1117

Chapel Hill/Carrboro $1,206 $1.27 -1.00% 1.10% -5.80% 789 369

East Durham $1,088 $1.13 0.80% 1.80% 4.20% 38 63

Far North Raleigh $1,184 $1.18 2.40% 5.10% -3.70% 0 117

Near North Raleigh $1,196 $1.28 -0.60% 0.20% -4.80% 428 309

North Cary/Morrisville $1,209 $1.18 -1.60% -1.90% -4.60% 913 923

Northeast Raleigh $1,117 $1.16 0.00% 2.40% -4.30% 310 485

Northwest Durham/ Downtown $1,271 $1.47 0.10% -0.80% -5.20% 392 84

Northwest Raleigh $1,170 $1.17 1.50% 2.80% -4.60% 0 -24

South Cary/Apex $1,183 $1.16 0.30% 1.90% -5.40% 1163 989

Southeast Raleigh $1,131 $1.14 -0.10% 1.30% -3.70% 378 523

Southwest Durham $1,098 $1.14 -1.10% -0.10% -4.80% 269 137

Market Indicators TTM Change

Rent

Vacancy

Absorption

Supply

*Chart indicates growth percentage for the Trailing 12 months as either flat, increase or decrease. An increase or decrease represents a 50bps change from the previous year.

Walter Tower

All information contained herein is from sources deemed reliable; however, no representation or warranty is made to the accuracy thereof.

The Raleigh-Durham market has seen a large influx of new construction with over 8,000 units underway across the region. The market has also outpaced the national average in inventory growth year-over-year at 3.4% versus 1.9%. With over 5,800 units delivered in the past 12 months, absorption bounced back from its glut in 2Q 2020 to over 2,700 units alone in 3Q 2020. The final number of units absorbed in the market this year was 5,092, down 5.8% from the previous year. As Raleigh continues to see an increase in population (approximately 64 new residents a day), demand should remain strong as regulations loosen and people begin to operate at post COVID-19 levels.

Construction - Supply - Demand

Occupancy in the Raleigh-Durham market increased from 2Q 2020 levels to finish at a flat year-over-year figure of 95.3%. The Raleigh-Durham market has been more resilient to the impact the pandemic is having on the apartment market as people continue to migrate to the area from major metro areas for more affordable housing options. This in-turn has helped keep occupancy and collections in the region at a very sustainable level. The Triangle’s Class A and B properties have been the most unaffected by the pandemic. On a national level, according to data collected from 11.5 million unit across the country, 93.5% of apartment households made full or partial rent payment in December, down slightly from 2019 December figures of 95.9%.

Occupancy & Collections:

Notable Projects Under Construction

Projects Under Construct ion Units Est imated Del ivery Developer

Alta Davis 408 Dec-21 Wood Partners

Ellis Crossing Townes 250 May-21 The Halle Companies

Mosaic Lofts 231 Jan-21 Eco Group, LLC

Bainbridge Aviation Crossing 298 Dec-21 The Binbridge Companies

Clairmont at Trinity 153 Mar-21 Kotarides

Walter Tower 376 Jan-22 Kane Realty Corp

Overture Cary 188 Apr-21 Greystar

2020 YEAR ENDMULTIFAMILY REPORT

Propert ies Units Year Bui l t Pr ice PPU Locat ion Buyer

The Dillon 271 2018 $85,000,000 $313,653 Raleigh MetLife

Solis Brightleaf 192 2019 $58,200,000 $303,125 Durham Principal Real Estate Investors

The Metropolitan 241 2018 $65,000,000 $269,710 Raleigh Snell Properties

Park & Market 409 2009 $110,000,000 $268,949 Raleigh Blackstone

Corltand Cary 205 2019 $49,200,000 $240,000 Cary Round Hill Capital

The Townes at Bishops Park 51 1964 $12,150,000 $238,235 Raleigh Opus North Real Estate

The Manor at Weston 302 2020 $69,300,000 $229,470 Cary Eaton Vance Real Estate Group

Leigh House 245 2016 $55,250,000 $225,510 Raleigh Eaton Vance Real Estate Group

Crabtree Lakeside 221 2017 $49,500,000 $223,982 Raleigh Stony Point Development Group

Lincoln 224 2019 $48,750,000 $217,634 Raleigh Hargett408, LLC

Preston View 382 1999 $78,750,000 $206,152 Morrisville The Dermot Company

Exchange at Holly Springs 316 2019 $65,100,000 $206,013 Holly Springs Myers Apartment Group

The Reserve at Cary Park 240 2006 $49,440,000 $206,000 Cary The Connor Group

The Villages at Westford 296 2020 $60,750,000 $205,236 Apex Blackstone

Braxton Cary Weston 288 1995 $57,600,000 $200,000 Cary Passive Investing


Capital Markets

Apartment Sales in the Raleigh-Durham market have rebounded significantly from the steep decline the region saw in 2Q 2020. The 3Q and 4Q sales figures alone totaled approximately $1.4B of transaction volume. Throughout the pandemic, the Raleigh-Durham multifamily sector has remained one of the top investment vehicles driving real estate capital markets. Investors have remained confident and are capitalizing on one of the fastest growing markets in the nation with the average price per unit growing north of $186,000. Additionally, reporting from a national level stated that 74% of transaction volume has been seen in non-major markets (i.e., Raleigh, Nashville, Austin). With other sectors like hospitality, retail and office being devastated by the on-going pandemic, investors can be assured that the multifamily sector, especially in Raleigh-Durham is poised to have significant positive momentum going into 2021.

Notable Triangle Sales 3Q & 4Q COVID-19

The DillonApartments


When looking at the lending environment for multifamily on a national level, it is easy to see the major impacts of COVID-19. The onset of the pandemic caused a major halt in originations as lending institutions readdressed their underwriting requirements for specific property types. As 2020 progressed, it is clear that the multifamily sector lending has fared way better than most asset types. In 2020, commercial real estate mortgage originations were 35 percent lower than 2019 figures. However, multifamily originations were down only 17 percent, with lending by the government-sponsored enterprises down only three percent. This was half the decline of industrial properties, one‐third the decline of office properties, and one‐quarter the decline of retail properties. FHA origination volumes were also 1.5x greater than 2019 volumes. Although the pandemic is creating uncertainty among investors and lenders about how to properly underwrite many properties, low interest rates and stable property values have been drawing borrowers to multifamily properties at a rapid clip.


Notable Triangle Sales 3Q & 4Q COVID-19

Propert ies Units Year Bui l t Pr ice PPU Locat ion Buyer

Carrington at Perimeter Park 266 2007 $52,000,000 $195,488 Morrisville Bluerock Residential

The Columns at Wakefield 324 2002 $62,500,000 $192,901 Raleigh Stonebridge Investmentts

Mariners Crossing 306 1995 $54,500,000 $178,104 Raleigh The Related Copmpanies

Cameron Hills 124 1954 $16,424,638 $132,456 Raleigh Terwilliger Pappas

Quinn at Riverglass 168 1991 $26,000,000 $154,761 Raleigh S2 Capital

Foxridge 92 1999 $13,725,000 $149,184 Durham SREIT

Hamilton Ridge 178 1986 $26,500,000 $148,876 Raleigh The Related Companies

Retreat on Lake Lynn 344 1986 $51,000,000 $148,255 Raleigh Knightvest Capital

River Birch at Town Center 176 1996 $25,783,000 $146,494 Raleigh SREIT

Cleveland Crossing Apartments 170 2014 $23,850,000 $140,294 Garner Stoneweg

Pine Ridge 60 1973 $8,200,000 $136,666 Cary Magma Equities

Colonial Arms 46 1968 $6,070,000 $131,956 Raleigh Trinity Properties

Capital Flats And Magnolia Square 85 1982 $10,350,000 $121,764 Raleigh Wolf Multifamily Investment

The Flats on 7th 136 1980 $15,800,000 $116,176 Garner Somerset Partners

Courtyard 53 1972 $5,950,000 $112,264 Raleigh Wolf Multifamily Investment

Enclave @ Crabtree 176 1972 $14,500,000 $82,386 Raleigh EBEX Holdings

Marquis Gardens 400 1975 $32,500,000 $81,250 Durham Concordia Properties

Carrington at Perimeter ParkSolis Brightleaf



Scenic beauty, a moderate climate, a culture rich in history and the arts, world-class sports and recreational opportunities all make North Carolina an exceptional place to live and do business. The Raleigh-Durham MSA, commonly referred to as The Triangle, spans seven counties in the central region of North Carolina. The “Triangle” reference was first coined in the late 1950’s with the creation of Research Triangle Park, named for its location relative to three tier-one research universities - North Carolina State University, Duke University, and the University of North Carolina at Chapel Hill, and the cities in which they are located - Raleigh, Durham and Chapel Hill.

Raleigh-Durham MSA Overview

Higher education is considered the cornerstone of the Triangle region. With three tier-one research universities and twelve additional colleges and universities that have a combined enrollment of 131,000, all are a major contributor to the region’s high-performance workforce. The region saw 42,000 graduates with bachelor’s degrees or higher in 2019. The Raleigh-Durham MSA has a total population of 1.9 million, of which 49% hold bachelor’s degrees or higher. Companies relocate and expand here because of the quality and depth of the existing talent pool and the pipeline of graduates coming from these educational facilities.

Education & High-Performance Workforce

RDU MSA Educational Attainment

Bachelors Degree

51%

Masters Degree24%

Doctorate Degree

6%

Associates Degree

13%

Professional School Degree6%

Field of Study, Bachelor’s Degree & Higher

STEM51%

Arts, Humanities,

Other23%

Business17%

Education9%

“The Triangle is at an exciting crossroads, continuing to lead the country in nearly every measure of economic success. Our talent bench is already quite deep, especially when compared with many other metropolitan areas of our size across the nation.”Raleigh Chamber of Commerce

“Durham is in the midst of an entrepreneurial boom. Entrepreneurs and startups are attracting national attention from the public sector, Silicon Valley investors, and talented individuals worldwide. From its beginnings in tobacco and textiles to Black Wall Street and the Research Triangle Park, Durham is a community of entrepreneurs who value creative ideas, asking “What if?” and bringing talented people together to answer that very question.”Greater Durham Chamber of Commerce



United States Department of Veteran Affairs (VA) Health Care SystemThe US Department of Veteran Affairs announced it recently accepted an offer to lease 244,860 square feet of space for a new outpatient multi-specialty clinic in the Town of Garner. The site for the new construction is approximately 17 acres located on the west side of N.C. 50 between Rand Road and Arbor Greene Drive. The real property investment amount for the project is estimated to be about $100 million It will employ nearly 400 employees and serve around 25,000 veterans annually.

https://www.garnernc.gov/Home/Components/News/News/1286/17#:~:text=Garner%2C%20NC%E2%80%94The%20U.S.%20Department,in%20the%20Town%

Local Economy Job Expansions & News

EPIC Games Expansion Big shift for Cary Towne Center as Epic Games buys site for $95M for headquarters campus. Cary Based video game and software giant closed on a $95M deal with Turnbridge Equities and Denali Properties to buy Cary Towne Center. Epic Games plans to finish the development, which they are working on with the Town of Cary, by 2024. Details of the new development are still being collected.

https://www.bizjournals.com/triangle/news/2021/01/03/epic-games-buys-cary-towne-center-for-headquarters.html




East Durham

Far North Raleigh

Southeast Raleigh

Northeast Raleigh

Central Raleigh

South Cary/Apex

Chapel Hill/Carrboro

Northwest & Downtown Durham

Southwest Durham

North Cary/Morrisville

Northwest Raleigh

Northwest Raleigh

Near North Raleigh

David AdamsPresident919 582 3110 [email protected]

Bo McHugh Associate 703 717 [email protected]

Please feel free to contact us.

APG ADVISORS1201 Edwards Mill Rd, Ste 300Raleigh, NC 27607www.apgcre.com

Sources: https://app.rcanalytics.com/

https://www.axiometrics.com/

https://www.bizjournals.com/triangle/news/2020/10/14/triangle-named-best-in-nation-for-2021-real-estate.html

https://rebusinessonline.com/lending-environment-still-rocky-due-to-pandemic-say-panelists-at-interface-carolinas/

https://www.mba.org/news-research-and-resources/research-and-economics/commercial/-multifamily-research/blog/blog-posts/current-blog-posts/cre-property-sales-and-mortgage-originations

https://img03.en25.com/Web/MortgageBankersAssociation/%7B5f7c6e01-4c36-4035-b045-c9210928212a%7D_Jamie_Woodwell_-_January_2021_-_Trepp___Commercial_Real_Estate_Direct_The_Year-End_2020.pdf

Raleigh-Durham2020 YEAR END MULTIFAMILYMARKET REPORT

Documents

Raleigh-Durham YEAR END MULTIFAMILY MARKET REPORT