Multifamily housing sales grind to a halt in Salt Lake City

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The number of transactions between building owners and investors looking to buy multifamily housing has ground to a near complete halt in Salt Lake City, the latest reaction to tighter capital markets nationwide as a result of higher interest rates.

CoStar, a leading provider of commercial real estate data, reported there were virtually no sales of apartment buildings in the first three months of the year. That’s a tremendous drop from the $336.8 million worth of multifamily buildings sold in the third quarter of 2021.

That’s likely incomplete data, given Utah law doesn’t allow for the public disclosure of information from property sales, according to multiple sources who confirmed they sold properties in the first quarter of the year.

“We closed a 100-unit building at the end of March,” said Kip Paul, vice chairman of investment sales for Cushman & Wakefield in Salt Lake City. “I know there were three more.”

Still, Paul and other brokers confirmed that the market for buying and selling apartments has come to a relative halt after a rapid increase in borrowing costs dried up sources of loans and sent the value of commercial real estate into a free-fall in Salt Lake City. 

“It’s not zero but for sure it’s very, very low,” Paul said.

JLL typically focuses on office and industrial space, rather than multifamily. But the firm did track multifamily sales in 2022 and “they did fall off a cliff in Q4,” said Phil Brierley, senior director of capital markets with JLL.

Data on multifamily housing sales in Salt Lake City available from CoStar.

The slowdown helps to solidify the fact that after a yearslong building boom that withstood a recession and pandemic, things in the capital city have slowed way down.

At the heart of the slowdown are the market’s realization that the era of ultra-low interest rates is, indeed, over.

“The market realized what was happening and interest rates started moving up, the volumes just went down,” Paul said. “Values are down pretty significantly.”

The market is effectively at a standoff between building owners who want or need to sell at a certain price and buyers who have access to a much smaller pool of capital or who aren’t willing to pay 2022 prices in 2023.

That standoff has made figuring out the current price of buildings difficult after a period of unprecedented price appreciation for all real estate.

“Banks rely on an appraisal, and appraisals don’t have current sales,” said John G. Taylor, with Legend Partners. “They’re guesstimating based on the previous market. They don’t have data because there aren’t transactions. It’s a chicken and egg, cart and a horse situation.”

Brokers didn’t suggest the slowdown was apocalyptic for multifamily. But there are plenty of signs in the office market that things look bleak, and as loans start to mature on newly built multifamily buildings that have a much smaller market of potential buyers, prices are likely to go down.

“When someone is getting crunched and the bank says the loan’s due, that’s when you’ll see those first transactions and those are going to be low,” Taylor said. “So it’s a quandary.”

Paul said there might be an issue with smaller developers or building owners who need to sell, though apartments are faring much better than office.

“Values are down 25-50 percent depending on the product type,” Paul said. “Apartments and industrial are hanging in there the best.”

Paul noted the U.S. Bank building Downtown recently sold for less than half of what it might have two years ago. Apartments might follow suit in some way. 

Some of that deflation comes from prices coming back to reality after a period of overpaying.

“They were overpaying because rents were going up so fast. Rents aren’t going up as fast going forward,” Taylor said. “If you don’t have to sell, don’t sell today. If you have to sell, there’s a lot of people with a lot of money.”

“But they’re vultures,” he added. “They’re looking for a deal.”

Email Taylor Anderson

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Posted by Taylor Anderson

Taylor Anderson grew up near Chicago and made his way West to study journalism at the University of Montana. He's been a staff writer for the Chicago Tribune, Bend Bulletin and Salt Lake Tribune. A move from Portland, Oregon, to Salt Lake City opened his eyes to the importance of good urban design for building strong neighborhoods. He lives on the border of the Liberty Wells and Ballpark neighborhoods.