Managing Conversion Risks in Multifamily Frenzy

By: Michael Polentz
– GlobeSt.com

Unless you have been hibernating since the beginning of the "great recession," most real estate professionals acknowledge that multifamily development has literally been exploding over the past 18 to 24 months. Existing product continues to generate record high trades and new development cannot be put on the block quickly enough.

Merchant builders are once again out in force and institutional investors are paying-or overpaying-for assets with little to no regard for estimated cap rates or the amount of existing product in the marketplace.

By way of example only, in a certain large San Francisco Bay Area city, more than 5,000 units of new multifamily product are in various stages of development and are all located within a few square miles off of a single street. Does all this activity mean we are seeing a new multifamily bubble?

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