Multifamily Investment Capital

The multifamily sector continues to draw a steady demand for financing.

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How strong is the multifamily market today? A slowdown in the Multifamily investment sector doesn’t appear to be coming anytime soon.

Still robust: The one thing everyone in the capital markets is in agreement about, is not changing is the amount of capital flow that continues to go into real estate. Neither demand nor allocation will shift in 2019. Debt and equity capital is flowing, and that is the key to multifamily investment business.

Competition: There’s concern that it will be a more competitive landscape this year to win quality deals, because so many people are competing. The industry volume targets are big numbers this year, but confident in the market remains strong. 

A resilient industry: Experienced investors understand they won’t be getting the same level of returns as they had in the past. Most are willing to accept that. This business is all about the math. If rates are going up, the prices of buildings are going to do down, or investors must be willing to accept slightly lower returns. We are seeing evidence that investors are willing to accept those lower return targets. The market will continue to remain very active.

Investors love commercial real estate: Since the economic downturn, we have seen a nine-year run of rent growths and high occupancy levels. The fundamentals for commercial real estate are very strong. We always keep our eye on the economy and the fundamentals of real estate. Are we seeing weaknesses in rent growth? We haven’t seen it yet. The people who are out there day to day doing deals, their optimism is very strong. Just look at 2018; the sector remained strong through four rate increases. The fundamentals with economic growth, rent growth and occupancy rates are strong. It’s hard not to like commercial real estate with the performance it continues to sustain. 

No multifamily slowdown: Homeowner affordability concerns continue to drive strong demand for rental units, which in turn bolsters demand for multifamily investment. There will be continued demand for affordable housing and for new housing. We are seeing a net decrease in homeownership. The drivers pushing multifamily are coming from a number of directions. Multifamily is strong both in urban and suburban areas.

Properties continue to lease up rapidly. If we start to see a hesitation in lease-up, investors will ponder whether multifamily is ready for a slowdown. Until we see that,  optimism remains high for multifamily investment.

Lessons learned: When it comes to financing requests, everyone is disciplined these days. Lenders are not going crazy with high loan-to-values. We learned a lot from the last downturn. There is much better discipline in this industry than we’ve seen in the past.

Industrial remains strong: Industrial continues to be one of the top-performing asset classes. There continues to be a need for more industrial space. I don’t think we will see that slow down anytime soon. We are impressed at the level of pricing that we are seeing in the industrial market. This will continue to be a very strong asset class.

Bullish: It pays to be cautious when looking to the future. Right now, unless there is a black swan event that disrupts the markets, we are very bullish. The market is strong.

 

 

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