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Better Fundamentals Boost Multifamily Sales in Alabama's Largest County

CoStar Market Insights: Out-Of-State Buyers Behind Large Deals in Baldwin County
July 31, 2018
The Arlington at Eastern Shore apartment complex in Spanish Fort, AL

Baldwin County has had some of the strongest demographic growth in all of Alabama. This strengthening climate has drawn the attention of many out-of-state investors, propelling the metropolitan area’s sales volume higher than the historical average for four of the past five years.

Baldwin County is not only Alabama’s largest county by land size, but it has also been leading the state in population growth. Since 2010, the county has increased its population by more than 30,000 people, equating to a roughly 17 percent increase. Job growth has also been strong. Currently at 3.3 percent, Baldwin County has seen job growth more than double the national average every year since 2015. This has been led by strong gains in the professional and business services, leisure and hospitality and financial activities industries. Income growth has generally kept pace with the national statistic, resulting in the median household income besting Alabama as a whole by nearly 25 percent.

These strengthening fundamentals have seemed to make the climate for multifamily investments increasingly favorable, particularly to out-of-state investors. Since 2015, Baldwin County has averaged roughly $71 million per year in volume, compared to the historical average of just over $30 million per year. Cap rates have compressed throughout the cycle, however they remain nearly 150 basis points above the national average. Out-of-state buyers from large metros such as Dallas, Los Angeles and New York have represented a lion’s share of the marquee deals.

See CoStar COMP #4433140.

In July 2018, Dallas-based Transcontinental Realty Investors and Adobe Properties & Investments purchased the 4-Star, 200-unit Villas at Bon Secour for $18.1 million, or $90,500 per unit. The fully leased complex was built in 2008. While asking rents for this property are below the region’s average, concessions are essentially zero, bringing effective rent much closer to other properties in the metropolitan area.

See CoStar COMP #3309691.

In 2015, the largest sale of the cycle came when Passco Companies, based in Irvine, CA, spent $42.98 million on the 300-unit The Arlington at Eastern Shore. At more than $140,000 per unit, the 4-Star property received over twice the average price per unit seen in Baldwin County. The garden-style complex was 95 percent occupied at the time of sale.

Baldwin County’s strong underlying demographic fundamentals position it as an emerging market for national investors. The concentration of new 4 -and 5-Star assets further increases its attractiveness to out-of-state buyers who are looking for larger returns than what may be common in their home markets.

CoStar Market Insights provides a snapshot of recent real estate trends. The CoStar Market Analytics team monitors commercial and multifamily real estate across 390 metro areas, with a granular understanding of the projects, players and economic trends that move these markets.

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