December 16, 2020
Heads up: In 2021, the Multifamily Acquisition market will be surging.
This may be a strange time to seem bullish about anything—we’re in the midst of a devastating pandemic taking a grievous human and economic toll. But while acknowledging the painful present, it’s also important to look to the future, and we predict that in this vital sector, it will get brighter. However, it will also involve a kind of mirror effect: Many markets struggling now will rebound, while those experiencing strong growth since springtime will see a slight downtick.
First, consider that this business, like so many others, is cyclical, with spikes and hiccups alternating regularly. We ended 2019 with a record-breaking year for transaction volume, and all signs pointed to that repeating through 2020 and 2021. However, even the most dire crisis management plan didn’t anticipate our current situation. Yet through all the peaks and valleys, demand continues to tremendously outpace supply.
In fact, even during the ongoing crisis, the multifamily market has outperformed most real estate sectors. Some high-profile markets have taken a hit—New York City and San Francisco, for example, keep generating scary headlines—but these urban centers won’t lose their appeal permanently; there will be always be city dwellers drawn to jobs, people and world-class amenities located in urban areas. Meanwhile, as we’ve previously reported in Rent Growth, Rent Fall: A Tale of Two (Kinds Of) Cities, many tertiary markets have had the highest rent growth in recent months. Some of those will take a breather; they’ll keep growing, but not as fast.
To be clear, there will be changes. We were already heading toward a remote workforce, and Covid-19 accelerated that trend. Also, a generation of millennials is reaching the family formation stage, and they want different options—more space, more suburban, more affordable and more flexible. That adds up to a shortage of rental options in suburban submarkets, and this is where we’ll see the greatest acquisition and development activity. Meanwhile, Baby Boomers are full swing into retirement, and having a positive effect on both urban and suburban areas.
As the market shakes out, the investors who stepped back will reap the benefits. Overseas investors are increasingly involved, which will have a ripple effect. Fannie Mae and Freddie Mac will do what only they can do. Interest rates will remain attractively low for a while.
For these and other reasons, CBRE Research forecasts that multifamily investment volume will be around $148 billion in 2021—still lower than 2019, but a whopping 33% jump over 2020.
So that’s the buzz for 2021: The trends are plain to see, the economics are in place, demand is surging, the need for more supply is evident, and the funding is ready. The key is to identify which assets in which markets at which prices offer the greatest investment potential.
Offerd tracks these trends and properties through access to 10,000-plus data points at the national, market, sub-market, and property-levels, and uses the knowledge to shape and execute targeted sourcing campaigns specific to each investor’s acquisition strategy.