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Multifamily Investment Soars To New Heights


Multifamily Investment Soars To New Heights
First quarter was the strongest on record.

By Lynn Pollack | May 13, 2022 at 08:25 AM

Multifamily investment in Q1 hit an all-time high, accounting for the strongest first quarter on record and increasing 56% year-over-year to $63 billion.

That figure brought the trailing four-quarter total to $374 billion, according to research from CBRE. The sector accounted for 37% of total commercial real estate investment volume in the first quarter, followed by office at 21% and industrial at 20%.

“Strong investor appetite compressed the average multifamily cap rate to an all-time low—a trend that most benefited the red-hot Sun Belt markets,” CBRE experts noted in the report.

Absorption also hit new heights, at a record four-quarter absorption total of 695,100 units in Q1 – an increase of 12% over Q4 2021 and up 77% from the previous annual high set in 2000.

The multifamily market set a record four-quarter absorption total of 695,100 units in Q1 2022—up 12% from the previous quarter and 77% higher than the previous annual record of 393,000 units in 2000. Net absorption of 96,500 units was also the highest first quarter total since then.

The overall vacancy rate for the sector fell by 20 bps quarter-over-quarter and by 2.5 percentage points year-over-year to hit a record low of 2.3%, with average net rents increasing 15.5% over Q1 2021 totals.

Just two cities tracked by CBRE – San Francisco and San Jose – now have average rents that exceed pre-COVID levels. The firm tracks a total of 69 cities across the US for its analysis, and all 69 markets had positive rent growth year-over-year, with the increase reaching double digits in 56 markets.

The Southeast region posted year-over-year rent growth of 22% in the first quarter, with every Southeastern market but Louisville showing growth of more than 10%. Florida markets all had gains of more than 20%.  And all seven Mountain West metros the firm surveyed posted year-over-year rent growth in excess of 15%, led by Phoenix at 25.6%.

The average single-family asking rent in the US was $2,018 per month, according to Yardi Matrix.  Yardi has previously forecast that the Sun Belt will continue to see rents tick up, though at a more sustainable rate than in 2021. Southeastern US cities rank high on Yardi’s 2022 rent forecast, led by Tampa (6.6% growth), the Southwest Florida Coast (also at 6.6%), Raleigh-Durham (6.5%), Atlanta (6.2%) and Orlando (6.1%).

“Strong multifamily fundamentals persist, with favorable migration trends, high household formation, and strong wage and job growth contributing to continued demand. An abundance of equity and debt capital remains available, albeit at significantly higher rates than enjoyed in the past few years,” said Brian McAuliffe, President of Multifamily Capital Markets for CBRE. “Looking ahead, while investors continue to have strong convictions on market fundamentals, bidder pools have reduced due to the increase in the number of offerings in the market and we are experiencing upward movement in cap rates as debt volatility impacts pricing.” More units were also delivered across the four quarters ending in Q1 2022 than since 1987, with the first quarter deliveries clocking in at 292,500. More than 400,000 units are also currently under construction, leading CBRE analysts to predict deliveries this year will eclipse 2021 totals. Dallas/Ft. Worth led for multifamily investment over the last four quarters and accounted for nearly 8% of the US total, with $29.2 billion in total volume. Atlanta followed in second place at $21.4 billion, up by 150.1% year-over-year, with New York close behind with $17.7 billion.

Full article by Lynn Pollack: https://www.globest.com/2022/05/13/multifamily-investment-soars-to-new-heights