Apartment Development Boom Expected in 2012

Driven by low vacancy and the shift toward renting versus buying homes, the fully recovered apartment sector is poised for a development spike in 2012, according to PricewaterhouseCoopers’ 4Q11 PwC Real Estate Investor Survey. In addition, low interest rates and the availability of construction financing are creating incentive for developers who’ve been waiting on the sidelines since the market downturn, according to the report.

“Surveyed investors continue to view the apartment sector as an attractive play in delivering steady cash flows driven by solid rental demand and rising rents,” said Susan Smith, editor in chief of PwC’s quarterly survey. “As a result, investors view this sector as a hotbed for further investment activity. While government-sponsored entities Fannie Mae and Freddie Mac have historically propelled sales activity in this sector as the primary sources of debt, stellar apartment market fundamentals are attracting debt capital from other sources, such as banks and life companies, increasing the competitiveness among lenders and buyers.”

Despite the uncertainty of the U.S. economy, the majority of PwC’s survey respondents “view commercial real estate as favorably priced,” said Mitch Roschelle, a partner in PwC’s U.S. real estate advisory practice. “Looking ahead to 2012, our report suggests that investing in U.S. commercial real estate is an attractive play and will gain increasing global attention due to its hard asset nature and current income-producing characteristic, along with its total return potential.”