Every time we come out of a recession the Class A properties have lead the way in occupancy growth and rent growth, followed by Class B properties and then Class C properties. The last three years have been no different. Class A properties have been aggressively raising rents but are now starting to face some resistance while Class B properties have been showing stable growth. The Class C properties were the hardest hit in the Recent Great Recession as is typical in every recession. We are now at the point in the recovery cycle where Class C properties are filling up.
Class C naturally lags the other classes during the early part of the recovery. During the contraction period there is a domino effect that occurs as Class A properties lower rents to maintain occupancy. When that occurs residents are able to move up in class from a Class B to a Class A property. That occurs all the way down with Class C ultimately being hit the hardest. Class A properties are still raising rents more on an absolute dollar basis, but Class C has the best relative growth.
We have a number of well Qualified Buyers ranging from Private Investors, REIT’s, 1031 Tax Deferred Exchanges and Hedge Funds all anxious to invest in apartments. Some require financing and some are paying all cash. As interest rates increase the gap will widen in seller and buyer expectations. Rates appear to be on the rise and it doesn’t look like we will see financing this cheap for another cycle, if ever. It is easier to cut a deal when financing is cheap. It can’t get much better than it is now so it is better to sell sooner than later.