Strong Shifts in Multifamily, Retail Real Estate Sectors

The multifamily sector is poised to take advantage of positive fundamentals as demographics continue to favor renting over buying, according to Edward Kobel, president and chief operating officer of the Tampa-based DeBartolo Development.

Among the company's investment sectors, which include multifamily, limited service hotels, anchored retail and a "special situations" category that primarily consists of land, Kobel said in a video interview with REIT.com at the Akerman U.S. Real Estate Summit this month in Miami that the highest returns have been in the multifamily sector.

"The fundamentals in the multifamily space are a long-term paradigm shift for America," he said. "We now have renters by choice."

Kobel noted that in addition to a new, younger generation of renters who are choosing to rent instead of buy, he has noticed that the baby boomer generation is also turning more to apartment communities by choice.

"Baby boomers that went deep, long and over-committed on a mortgage are coming to our communities in droves. We think that trend is here to stay for awhile. There's another $4 million in foreclosures coming through the system," he said.

Kobel noted that while new multifamily developments are beginning to take shape, he is not worried about overbuilding. He also said access to debt and equity in the capital markets today has never been better than in his 32 years in the business. However, he added that only strong borrowers with strong balance sheets and a solid operating history will be able to take advantage of the debt and equity.

"The banks are very tempered on what they're doing," he said.

In terms of DeBartolo's development plans, Kobel said the company has been active in building new multifamily properties, but is cautiously optimistic when it comes to the retail sector.

"Retail is a bigger paradigm shift than what we just described with multifamily," said Kobel, adding that online sales are increasing. He said he expects physical shopping malls to decrease in numbers as a result. He speculated that 40 percent of major regional malls will close in the next decade.