2020 was one of the toughest years on record for the multifamily industry, and for good reason, because Covid-19 and the Pandemic had a huge impact on multifamily.
The ongoing Pandemic, job losses, and lockdowns took their toll on multifamily in 2020, but the good news is that in 2021 the multifamily industry has stabilized and returned to pre-pandemic levels.
Thanks to the widespread effort to get people vaccinated across the United States, economic stimulus and the faced paced growth of the economy, the multifamily industry is picking up steam, just in time for leasing season and busy summer months ahead.
Getting Back To A Normal Multifamily Industry In 2021
Multifamily investors had a lot of havoc to deal with in 2020 including the fact that more people adopted work from home lifestyles, or moved away from urban centers to suburban areas.
As we approach summer 2021, the good news is that demand for multifamily properties is on the rise once again and investors who were adversely affected by the pandemic are getting back on track financially once again.
CBRE found urban migration during the pandemic continued to impact vacancy rates in urban submarkets, particularly in gateway metros. But the trend has stabilized or improved in most markets. “CBRE Research forecasts strong recovery of urban submarkets once most office workers can return to their offices and urban amenities are restored,” the report stated.
There was also some improvement in rent. While average rent was down 4.2 percent year-over-year, there was a clear directional change with a slight increase of 0.4 percent to $1,674 per month. Overall, rents are expected to reach pre-COVID levels by Q1 2022. In 36 of the hardest-hit urban core submarkets, 25 percent saw rent growth in Q1; 50 percent saw rent stabilization and 25 percent had rent declines. The report notes that three gateway markets are skewing the U.S. average rent. If San Francisco, New York, and San Jose, Calif., were taken out of the national average, the year-over-year decline would be a modest 1.1 percent.
The regions seeing the highest percentage of rent increases were led by Mountain West, where six out of seven markets had year-over-year increases in Q1 and all seven were up from the fourth quarter of 2020. The Southeast saw 15 of 18 markets record year-over-year rent growth and 17 of 18 up from Q4 2020. Six of the nine South Central markets had year-over-year rent increases and eight of nine were up from the fourth quarter of 2020.
INVESTMENT VOLUMES DOWN
The multifamily investment was down 12 percent year-over-year in the first quarter of 2021, totaling $35.5 billion. Q1 2021 investment dropped by 43.2 percent in Q1 from the fourth quarter, which saw a total of $62.5 billion invested. But CBRE said investment volume picked up significantly in the second half of the first quarter as more products hit the market. Overall, investor appetite was strong, especially in suburban markets, pushing cap rates down.
The report notes CBRE investment activity suggests there will be greater cap rate compression especially in many of the hot markets like Phoenix, Dallas/Fort Worth, and Austin, Texas. Dallas/Fort Worth led all metros with $2.8 billion for multifamily investment in the first quarter with $2.8 billion in total sales and 7.8 percent of all U.S. multifamily investment. Phoenix ($2.4 million) was followed by Los Angeles and Atlanta, both with $2.3 billion. The four Texas metros combined had $5.8 billion in investment volume during the first quarter.
In all, multifamily accounted for 36.7 percent of Q1’s total commercial real estate volume, followed by office at 21.1 percent and industrial at 20.3 percent.
Tips For Investing In Multifamily Properties In 2021
Let’s face it, 2020 was a year of upheaval in the United States, especially in major urban centers like Chicago, San Francisco, Minneapolis, and New York but the good news is that even though those markets have changed, other hot spots have emerged for investing in multifamily.
Texas remains a consistent hot spot for investing in multifamily properties along with Arizona, Las Vegas, and Florida.
To successfully invest in multifamily properties, especially out of state, make sure you follow these tips.
Tip #1 – Choose the type of multifamily property that you want to invest in and stick with that criteria.
Tip #2 – Carefully investigate the area that you plan on investing in multifamily. Make sure that the local data that you view wasn’t written more than 12 months ago because you don’t want to invest in an area based on old economic data.
Tip #3 – Assemble a team of experts to help you source, acquire and manage a multifamily property. Having the right team will save you the time, money, and effort of managing that property yourself.
Tip #4 – Be ready to take action when the right property becomes available. Waiting too long to take action could mean that you lose out on a great opportunity.
Tip #5 – Hire a local real estate agent if needed. This will save you the hassle of searching for a property yourself and ensure that you’re able to potentially find great deals when they become available.
Contact Trier Capital
Did you know? The U.S. Tax Code provides numerous ways for real estate investors to shield a portion of the positive cash flow investors receive.
At Trier Capital, Our simple step-by-step process allows you to accelerate your wealth creation so you can live a magnificent life on your terms, whether that means traveling the world, spending more time with family and friends, or making an impact.
For more information about the benefits of investing in multifamily properties with our company, contact us today by calling (630) 229-2383 or click here to connect with us online.