Apartment Investment Opportunity- Just Sold!
Potter Park was Sterling CRE Advisor’s most sought after apartment investment listings of 2019. The opportunity to invest in a newly constructed apartment complex in the surging Missoula market drew the attention of both local and national investors. There were many reasons that made Potter Park Apartments a very attractive commercial real estate investment including:
- Overall development quality
- Missoula’s growing reputation as a growing city, prime for investment
- Growing demand for rental housing
Potter Park’s Construction Offers a Modern & Marketable Apartment Investment
Potter Park’s 38 apartments were built in 2018. A great location, modern finishes and amenities as well as competitive rents meant that the project was almost fully leased at the time of the offering.
- The location in the Mullan & Reserve submarket is easily adjacent to the Missoula International Airport, I-90 and the shops and services located on Reserve Street. The apartments are near the Mullan BUILD area, which is set to open up 1,500 acres to development with a series of new road connections. Currently Potter Park is in a well served area, but also in the path of new development, making it a strong long term investment. The complex is also in a desirable school district, key to attracting the new pool of family tenants renting due to a lack of for sale housing.
- The apartment complex has the amenities renters truly want such as ample parking, storage units, well landscaped grounds and attractive exteriors. Low water use landscaping and individually metered utilities helps simplify property management. Interiors required no up fit and include full size washer dryers, laminate flooring, large private decks and patios. Investing in a stable property helps yield more immediate returns.
- Potter Park’s position in the Missoula Market offered rents slightly below similar complexes.
Missoula’s Ongoing Job Growth Is Attracting Investors
National and international investors are increasingly looking to secondary and tertiary markets to invest in. They see more potential growth in these cities and understand that they offer solid and secure investment opportunities. Missoula is on the radar for many due to consistent job growth, a burgeoning tech industry and a high quality of life.
- Missoula has seen employment growth post recession that has outpaced the national average. The University of Montana, an educated workforce, and an increasingly diverse economy are helping to create steady growth.
- Tech companies are choosing to locate in Missoula. The high quality of life is attractive to the talent they require, making it easy to recruit. Additionally, the University of Montana provides ongoing education options and an additional talent pool. Companies such as OnXMaps, Submittable, Class Pass, Lumen Ad and others have all elected to invest in Missoula as their home. As they grow and add jobs, their growth attracts similar companies to the region.
- Missoula’s high quality of life is an important factor in business attraction. In the 2019 Area Development Site Selection survey, corporations ranked skilled labor availability as their top factor in site selection, with quality of life ranking 6th, ahead of state & local incentives, available buildings and proximity to major markets. In summary, businesses are increasingly looking to locate where their workers want to live.
Growing Demand for Apartments in Missoula is Driving Investment Opportunities For Existing Properties
Demand for apartments is growing nationally and Missoula is seeing this growth as well. Several factors are driving investment demand for apartments including changes in the renter pool that have expanded interest in renting to new demographics that were traditionally homeowners, a homebuilding market that is struggling to keep supply in pace with demand in growing markets like Missoula, and a challenging development environment for multifamily due to land and construction costs, as well as regulations.
- In Missoula, demand for rental housing from younger adults over the past decade has ticked down, however growing demand from older renters is driving growth. The largest net gain in renters came from households with heads ranging from 24 to 35 (1,037) followed by households with heads ranging from 35 to 34 (918). Traditionally, these households would be looking to buy homes, not renting.
- Single family construction has not returned to pre-recession levels across the US, including in Missoula. Locally, single family permits peaked in 2007 at 513; 2019 had 421 permits issued for single family homes. Housing construction is not keeping pace with demand, pushing potential homeowners into rental units.
- Development, land and construction costs overlaid with development restrictions are stifling multifamily construction across the US, including in Missoula. This in turn makes existing properties more valuable to investors. Investment interest is not only high for turn key properties like Potter Park, but also for value add apartment complexes.
For more information on investing in Missoula’s apartment market, check out our 2019 Year End Missoula Apartment Market Report.