2022 Recap

National interest in the Fayetteville, NC, market is on the rise as the strength of the Sun Belt continues to draw investors into the region. The increase in activity resulted in a record $621M in multifamily sales volume in 2022 – a 17% increase over 2021.

Capitalization rates continued their downtrend, closing the year at 4.8% – a 110-point drop from 2021 and over 200 points lower than the long-run average of 7.1%.

The price-per-door is trending up, averaging $146K per unit – a 15% increase over 2021 and a 42% increase over pre-pandemic levels.

The Fayetteville market is also attracting foreign investors, with the Swiss-based Stoneweg purchasing West End at Fayetteville for $78.5M – or $218K per unit. While the purchase price was well above the market average, it was not the only property to close at over $200K per unit.

The Heights at McArthur Park closed for $61.75M or $214K per unit, and the 624-unit portfolio sale of The Preserve at Grand Oaks and Westlake at Morganton closed at $200K per unit. While these deals may be statistical outliers, they show the strength and attractiveness of the market.

With new development in limited supply, many investors are taking the value-add approach when investing in the Fayetteville market. The 274-unit Briarwood Apartments closed for $29M, or $105K per unit, and the 254-unit Windtree Apartments closed at $113K per unit.

 

Looking Forward

Located along the I-95 corridor and anchored by Fort Bragg, one of the world’s largest military installations, Fayetteville is experiencing a growth in development. Amazon is on track to open the new 1.3 million-square-foot fulfillment center early this year, and the ground has broken on several other development projects across the market.

Given the current macroeconomic environment, rent growth and affordability are top of mind for many investors. With the average asking rent at $1,178 per unit, and a median income of $59,632, the rental burden in the Fayetteville market is under 24% – well below the national average of 30%.

A stable population, job growth, and a tight rental supply have pushed asking rents up 8.5% year-over-year. While rent growth in national markets continues to cool, the limited rental supply and relatively few units slated to come online in 2023 should keep Fayetteville’s rental growth rate above the long-run average.

Like most North Carolina markets, sellers still have the advantage in the Fayetteville area. Currently, only five multifamily properties totaling 136 units are listed for sale in the area, and fewer than 50 complexes of ten or more units are listed for sale across the state.

Sweetwater Capital Investment Sales closed over 1,200 units or approximately 25% of the multifamily sales volume in the Fayetteville market in 2022. Sweetwater Property Management has over 1,200 units under management in the Fayetteville market, and our Mortgage Brokerage team is closing in on $4 billion in loan volume. Reach out to one of our skilled brokers to see how we can help maximize your asset value in the Fayetteville market and across the Southeast.

 

Let Sweetwater Capital be your trusted real estate partner for financing and investment sales. Contact us to finance your next commercial real estate project.