Marcus & Millichap: Baltimore's near-in class B/C apartment assets remain popular with investors
The following is culled from an apartment investment report for Baltimore, which can be found in its entirety as a PDF at the end of this story.
Job losses in Baltimore remained elevated through the third quarter, slowing household creation and weighing on the local apartment market. The year-to-date elimination of 16,200 positions has restrained renter demand and underpinned an 80 basis point uptick in vacancy, though this is certainly a milder increase when compared to the U.S. average jump of 120 basis points.
Correspondingly, rents in the Baltimore market have resisted economic pressures thus far in the recession but are forecast to decline in the third quarter due to continued tepid demand . At the submarket level, rents continue to trend higher in Parkville, Towson, Pikesville and Central Baltimore City, though average revenuesare declining due to rising vacancy. High concentrations of public and private employers, along with rents near the marketwide rate, have steadied demand in the Glen Burnie/Harundale/Odenton submarket, where revenue decreases have been held to 0.6 percent year over year.
Alternately, an oversupply of older Class B/C properties in the Dundalk/Essex/Rosedale submarket is accelerating rent reductions, leading to marked declines in cash fl ows. On the marketwide development front, construction output will remain high this year and into 2010, though lease-up times should improve
with more favorable economic conditions.
Falling revenues and tight capital markets continue to discourage acquisition activity. The decline in sales velocity has been less extreme in the past 12 months, however, than during the previous two years, when buyers began pulling back in an overheated market. Sales of smaller properties have been relatively constant in the last year, as the overall slowdown in velocity is attributable to a lack of institutional investment activity, particularly for larger assets in Howard County. Buyers remain bullish on apartment properties in Baltimore City, targeting Class B/C assets near Interstate 83 in the $40,000 per unit range. Additionally, investors are focusing on upper-tier assets in the $90,000 per unit range in affl uent infi ll locations.
File: Baltimore Apt Report.pdf