Exclusive Research Reveals Stable Outlook for the Multifamily Sector
While sentiment has dampened slightly, investors still prefer apartments over other commercial real estate property types
Capital is continuing to flow to the multifamily sector. Despite concerns that the real estate cycle is peaking—and with high levels of multifamily construction in some metros—fundamentals have steadily improved and investment sales remain robust. Exclusive research conducted by NREI indicates that the market is likely to stay that course for at least another 12 months.
Apartments remain a favored property type among commercial real estate investors. When asked to rate the attractiveness of the different core property types on a scale of 1 to 10, survey respondents scored multifamily the highest at 7.9, but the score on industrial properties continues to gain ground. It now stands at 7.5. Hotels and office assets both scored at 5.9, while retail’s score has crashed to 4.5.
The outlook for investment
The number of respondents saying they expect cap rates to increase for multifamily properties also hit a new high. Overall, 61.9 percent said they expect cap rates to increase (up from 48.5 percent in 2016). The previous high was in 2014, when 58.6 percent of respondents said they expected cap rate increases in the following 12 months.
Recent data from New York City-based research firm Real Capital Analytics (RCA) suggests that while multifamily investment sales volume has been declining in recent months, prices are still on the rise.
Rents still growing on average
“We don’t believe it’s time to turn out the lights on the expansion in the multifamily sector,” according to research firm Yardi Matrix. “Job growth and social and demographic trends foretell strong demand for the next few years.”
Source: NREI, David Bodamer Nov 29, 2017
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