Multifamily Remains a Smart Play Despite Growing Questions and Challenges
Multifamily has been among the hottest asset classes through the post-financial crisis recovery—and we believe there’s still room to run. In this report, we examine the national multifamily trends and drill down into the major metro markets to see how they compare in terms of rent growth potential over the next few years.
- Population growth and social trends such as urbanization, falling homeownership rates, later marriage and lower birth rates create long-term unique structural advantages for the multifamily sector.
- Occupancy rates are near historical highs. While we expect them to drop slightly, market conditions will likely remain fundamentally sound.
- Capitalization rates for apartments averaged 5.4 percent in Q3 2016, the lowest of any property type, reflecting strong investor confidence in these assets.
- Rents have risen much higher than household incomes in recent years and some of the more expensive markets are nearing the limit of what renters can bear.
- While the rate of multifamily growth is expected to slow, we believe supply-demand fundamentals and capital market forces will remain favorable for some time.