The U.S. multifamily market sector enjoyed a solid year in 2018 in which multifamily rent grew by 3.2% according to a survey of 127 markets by Yardi® Matrix, and wrapped up the eighth straight year of growth.
Since January 2011, rents nationally have increased by 31%, while annual rent growth has been at least 2.9% in every year save 2017. Rent growth has topped 3% in six of the last eight years.
Multifamily national report shows calm amid the storm
- U.S. multifamily rent remained at $1,419 in December, and year-over-year growth was 3.2%, also unchanged from November. Rent growth has been flat since the summer.
- 2018 proved to be a solid year for the multifamily sector, and 3.2% rent growth slightly exceeded going-in expectations. Despite the recent volatility in the financial markets, we foresee more of the same in 2019, with strong demand producing rent growth just shy of 3% nationally.
- Las Vegas (7.3%), Phoenix (6.5%) and the Inland Empire (5.5%) are the Top 3 metros, highlighting a trend of outperformance among secondary markets.
- Rent growth in 2019 will again be led by metros in the Southwest, West and South regions.
- Late-stage markets Las Vegas and Phoenix remain atop our rankings, as job and population growth drive demand in the desert.
- Both markets are benefiting from migration out of high-cost and tax-prohibitive areas in California and the Midwest. Job growth in tech and finance have attracted educated millennials, and warm weather and a lower cost of living continue to bring retiring Baby Boomers.
- Considering the late stage of the current cycle and significant new supply that has been added in the past three years, multifamily rent growth performed quite well and exceeded expectations in 2018
While acknowledging concerns that the unusually long cycle has played out, a report on the survey cites “reasons to believe multifamily fundamentals will remain vigorous in 2019 and beyond,” YardiMatrix says in the report.
Chief among those reasons is ongoing strong demand is that job growth remains robust, and social factors—such as student loan debt that limits first-time homebuyers, families remaining renters longer, and retirees downsizing and moving into rentals—are also likely to maintain demand for multifamily.
Multifamily trend similar to hotels
Multifamily could be taking a trajectory much like hotels, which have had nine consecutive years of above-trend revenue growth.
Hotels benefit from business profitability and travel, but also from lifestyle changes that lead individuals to spend more on experiences.
The financial market volatility issue
Indicators in employment, supply and occupancy trends forecast rent growth.
- Volatility in the financial markets over the last few months has been caused by concerns about a slowdown in global economic growth and policy uncertainty that includes the potential for increasing tariff fights.
- Despite the volatility in stocks and unexpected rally in Treasury prices, economic fundamentals such as employment and GDP remain healthy.
- Demand for real estate such as multifamily is not likely to fluctuate much in the short term, and volatility could even bring capital into the sector.
View the full Yardi Matrix Multifamily National Report for December 2018 for additional detail and insight into 127 major U.S. real estate markets.
Yardi Matrix offers the industry’s most comprehensive market intelligence tool for investment professionals, equity investors, lenders and property managers who underwrite and manage investments in commercial real estate. Yardi Matrix covers multifamily, industrial, office and self storage property types. Email email@example.com, call 480-663-1149 or visit yardimatrix.com to learn more.