Texas Real Estate Business • August 2022

www.REBusinessOnline.com August 2022 • Volume 18, Issue 6 THE COST OF CREATURE COMFORTS By Sarah Yaussi of the National Multifamily Housing Council Renters dish on which apartment features and amenities they’d be willing to pay more to have. W Pictured is a rendering of the pool area at The Westcott, a 315-unit apartment community by StreetLights Residential that recently opened in Houston. Nearly 75 percent of respondents to the 2022 NMHC/Grace Hill survey indicated that the absence of this amenity would be a deal-breaker when making a decision on where to rent. hat do renters want now? You might think that the latest and greatest tech upgrades would be at the top of their wish lists, or that fancy ﬁ xtures and ﬁ nishes would be a powerful differentiator when choosing among their rental options. In reality, however, the most valued apartment features and community amenities for the 250,000 or so renters surveyed in the 2022 NMHC/Grace Hill Renter Preferences Survey Report were, in large part, far simpler. Those amenities and services that al-lowed them to simplify their to-do lists and take care of their families and their own health clocked in at the top of our list. About the Survey NMHC/Grace Hill survey respon-dents were asked about their levels of interest in a battery of apartment fea-tures and community amenities. Fea-tures are those design aspects contained within the unit or home itself. Ameni-ties, on the other hand, are shared by residents of the community and most often refer to a rental community’s common areas. If respondents expressed interest, they were then asked how much more they would be willing to pay per month for an identical rental home that had that speciﬁ c feature or amenity. The report then ranked these features and amenities in two ways — percentage of SEE AMENITIES page 20 STARS ALIGN FOR SELF-STORAGE DEAL SLOWDOWN By Taylor Williams duo of quantitative and qualitative economic factors has set the stage for the size and number of self-storage deals to decline in the second half of 2022, following an 18-month pe-riod in which investment sales volume for the product type reached historically high levels. Leading the charge are the ubiquitous impacts of the Federal Reserve’s interest rate hikes, the primary mechanism by which the nation’s central bank is aim-ing to tame rampant inﬂ ation. The Fed most recently raised short-term interest rates by 75 basis points in late July, tar-The impacts of interest rate hikes notwithstanding, many sellers could opt to hold and rely on the property type’s historically strong performance during recessions. A geting a range of 2.25 to 2.5 percent on baseline pricing of overnight loans that ﬁ nancial institutions make to one anoth-er. That move followed a 75-basis-point hike in mid-June. Rising interest rates slow demand for commercial assets, eventually causing cap rates to elevate and prices to mod-erate. This type of monetary policy can also derail large-scale transactions for which buyers require more leverage. Part of what allowed self-storage deals in Texas to achieve record volume in 2021 and early 2022 was the closing of more eight-ﬁ gure deals, which was facilitated by cheap debt. According to a report from Marcus & Millichap, in 2021, there were more than 100 transactions across Texas that traded at $10 million or more — by far the highest number in recent history. Total deal volume in 2021 rose by 110 percent over the prior year, and though velocity slowed in the ﬁ rst quarter of 2022, Texas still saw roughly three times the number of trades typical for a quarter between 2015 and 2019, the report stated. With debt now considerably more ex-pensive, it’s inevitable that some larger deals that would have closed in the sec-ond half of this year will be tabled. “Last year, as a ﬁ rm we did about $2.3 billion in transaction volume, and through the ﬁ rst half of this year, we did about $1.25 billion,” says Mike Mele, vice chairman and head of Cushman & Wakeﬁ eld’s national self-storage adviso-ry group. “Now, however, we’re feeling the impacts that are hitting all commer-cial assets, and some deals are falling apart because pricing is signiﬁ cantly dif-ferent now from where it was in Febru-ary and March.” The other big driver behind what should be a slower second half is the SEE STORAGE page 21 INSIDE THIS ISSUE Panelists Explain Why Smaller Active Adult Projects Can Make More Sense pages 16-17 Frisco Embraces Mixed-Use Projects, Philosophy, Lifestyle page 18