Multifamily N Illinois

Redwood Capital’s Kelly: Expect a big 2019 for multifamily sector

Redwood Capital’s Kelly: Expect a big 2019 for multifamily sector,ph1

Active. That’s how Tammy Kelly, senior vice president with Chicago-based Redwood Capital Group, describes the multifamily sector in the Chicago region. And like others working this market, she predicts that 2019 will be just as busy in the apartment world.

Kelly is just one of the commercial real estate professionals who will be speaking during the 17th annual Real Estate Forecast Conference held Jan. 8 at the Hyatt Regency Hotel in Chicago. The enduring strength of the multifamily sector—which continues to chug along despite seemingly endless concerns that a slowdown must be on the way—will be one of the big topics at the event.

For now, though? Kelly says that Redwood Capital expects 2019 to be yet another strong year for the multifamily sector.

“There is a lot of competition in this market right now,” Kelly said. “A lot of companies are out there looking to invest in the same product we want to invest in. There’s a lot of institutional money being put to work. There is still strong demand from foreign capital that wants to invest in U.S. markets, too. There is still a lot of activity. A number of the transactions we closed were either some form of relationship-driven transactions or off-market deals.”

Kelly is seeing some changes in the market, though, where there is a growing demand for workforce housing. This type of multifamily housing is particularly needed in parts of the country where employment is on the rise. Kelly says that Illinois and Minnesota are two Midwest states where the demand for more affordable workplace apartment units is strong. Outside of the Midwest, Redwood Capital sees demand for workforce housing rising in Orlando, Denver and parts of Texas.

Redwood Capital is seeking opportunities in this space in 2019, Kelly said. The company is eying locations in suburban Chicago, Minneapolis, Orlando and Denver.

“We are looking for value-add opportunities,” she said. “We want places where you can go in and maybe do a light upgrade or even a heavier lift to improve the property and make it more attractive. We want to generate a good return on investment and provide affordable housing to that workplace demographic.”

Who needs more workplace housing? Kelly said that it’s not just blue-collar workers. This type of multifamily housing is needed by hospital workers, law enforcement professionals, firefighters and teachers, Kelly said.

“They are looking for a place to call home,” Kelly said. “They want affordable apartment units in a nice area. They will certainly pay a little bit more for an upgraded, modern space.”

Another constant for 2019? Foreign investors will continue to sink their dollars in the U.S. multifamily sector, Kelly said. The sector is just too safe of an investment to ignore.

“This is a sector that right now is behind only industrial,” Kelly said. “It is somewhat of a safe play. Multifamily isn’t exactly recession-proof, but with the way leases are structured, any needed recovery can be quicker. You are continuously turning the rent roll. When there is a downturn, it’s not that multifamily isn’t affected, but there is a quicker recovery time.”

No one can predict the future, but Kelly says that she expects the multifamily sector to remain strong in 2019. A growing number of people are choosing to rent, especially in walkable neighborhoods. That trend shouldn’t slow this year, Kelly said.

At the same time, new apartment product is offering more amenities that appeal to renters, everything from concierge services to state-of-the-art fitness centers. These high-end amenities are attracting even more renters, Kelly said.

“More folks today want to have some flexibility,” Kelly said. “You look at the younger adults. They don’t want to lock into anything. They don’t want to go through what they saw their parents go through during the housing downturn. Living in an apartment is easy living. You have no maintenance. You have that flexibility to move. It’s less worrisome than owning a home.”

Click here to register for the 17th annual Real Estate Forecast Conference to be held Jan. 8 at the Hyatt Regency Hotel in Chicago.