Multifamily Real Estate: 2021 Market Trends
Multifamily Real Estate
Multifamily has historically exhibited lower volatility and higher resilience than other asset classes. According to CBRE, U.S. multifamily property rents declined less than office and industrial properties during the 2001 economic recession, and their growth rate was considerably higher post-recession. Multifamily real estate also outperformed during and after the 2008-2009 recession, experiencing the lowest level of rent decline, the fastest recovery to pre-recession peaks, and the longest post-recession period of rent growth.
It’s worth noting that households tend to downsize to more affordable housing when faced with economic hardship. As a result, Class A assets did not perform as well as Class B assets this past year. Adding to this trend, Class A has generally been oversupplied for years. Class A renters also serve as a demographic more willing and able to leave for suburban, exurban, and parents’ guest house accommodations. Class C assets did have higher delinquency rates in many markets, with renters laid off or otherwise facing economic hardship due to COVID-19. Overall, however, the sector is still fairly strong. The National Multifamily Housing Council reported that 79.8% of apartment households made a full or partial rent payment by April 6, 2021.
Of course, this data encompasses a wide range of markets across the U.S., which vary by size, type, and average rental price. As the cost of living has increased in Tier 1 cities like New York, Los Angeles, and San Francisco, renters have increasingly moved out to the suburbs and more affordable metro areas. COVID-19 accelerated this trend: in most urban counties, more people moved out than in. The opposite was true in suburban ones. Most people who did move last year stayed close to where they came from—although select regions that were popular even before the pandemic did see gains. These markets with low cost of living, decent job growth, and favorable tax laws have particularly strong fundamentals.
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Whitepaper: Top Real Estate Markets
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