U.S. Multifamily Outlook Holds Strong and Shines Bright On Multifamily Landscape

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Multifamily-industry observers are optimistic that the sector will continue performing strongly and remain popular as an investment vehicle, according to a new multifamily outlook report from Yardi Matrix.

“The National Multifamily Housing Council (NMHC) gathered in temperate San Diego last week as much of the country was blasted by extreme cold,” the report says.

“The juxtaposition could be seen as a metaphor for the multifamily sector, which remains a bright spot on the investment landscape relative to other sectors both inside and outside commercial real estate,” it said.

Highlights of the multifamily outlook

U.S. multifamily rents did not change in January, remaining at $1,420, while year-over-year growth rose 10 basis points to 3.3%. Rents are at the same level they were in August.

■ Market players are largely optimistic about the prospects for the sector’s performance in 2019, based on the discussion at the conference in San Diego. Demand trends are expected to remain strong.

■ Las Vegas (7.9%), Phoenix (6.5%) and Atlanta (5.9%) comprise the top 3 metros, with each producing growth in the normally slow winter season.

A January survey of 127 major U.S. real estate markets showed that despite flat rent performance, which is normal for winter, year-over-year rent growth increased by 10 basis points to 3.3%, the sixth consecutive month above 3%.

“Such performance gives no indication that multifamily rent growth is on its last legs in the cycle,” the report says.

Older renters staying put, rental households growing in ages 20-34

Panelists at the NMHC conference were bullish on multifamily.

Speakers by and large expect demand to remain strong along the age spectrum. The 20-34 age category, which has the highest percentage of renter households, will continue to grow for several more years, the report says.

“Some speakers noted that household renters above that age group are increasingly remaining in rental housing (both single-family homes and multifamily) rather than purchasing homes. One noted that the demographic of some luxury apartment buildings encompasses an average age above 40 and average income above $200,000. Retirees are also downsizing from suburban homes and divorcing at a faster rate, which creates apartment demand,” the Yardi Matrix report says.

U.S. Multifamily Outlook Holds Strong and Shines Bright On Multifamily Landscape

Forecast rent growth, occupancy and yield expectations

Here are some highlights of this portion of the report:

  • One topic of conversation at the NMHC conference was the lower yield expectations among investors. Appreciation gains are likely to be modest in coming years.
  • Fannie Mae and Freddie Mac are expected to operate as normal in 2019, but new regulatory leadership could change the way they operate starting in 2020.
  • The ability to develop affordable housing con­tinues to be a sore spot. NMHC panelists talked about frustration with inconsistent enforcement of regulations and the high costs of building.

View the full Yardi Matrix multifamily national report for January 2019 for additional detail and insight into 127 major 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 matrix@yardi.com, call 480-663-1149 or visit yardimatrix.com to learn more.

 

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