Research

Robust today, robust tomorrow: Multifamily has the strongest outlook of the major property sectors

  • August 13, 2019

Based on a new report from Ten-X, the U.S. multifamily market has the strongest outlook among major CRE property types. Multifamily snatched the title belt from the industrial sector, thanks to a more manageable supply pipeline and strong demand.

Wage growth continues to improve nationally, and the labor market is thriving. Bolstered by increasing wages, renters continue to drive demand and spur rental rate growth.

Demand for multifamily properties is projected to be high this year, and starting in 2020, supply will cool down. This settling supply fixture is a bonus for the sector, keeping vacancies low and rent growth strong. In turn, NOI growth projections are solid and valuations are on track for continued growth.

Millennials Moving Markets

Today, 32% of adults aged 18-34 are living with their parents, due to the overwhelming burden of student loans, coupled with the increased social acceptability of living at home. While their absence from the single-family market has left it wavering, it has been a boon for the multifamily sector.

When millennials aren’t living at home, they’re renting. Unemployment is low and wage growth is strong, but the single-family market remains inaccessible. This market gap is being filled by multifamily spaces. Despite being at their highest levels since 2012, vacancies are projected to plummet to 5% by 2022.

Transaction Volume Strong

The volume of transactions in the multifamily space continues to ramp up, with the Southern and Western regions having the highest apartment-buying activity this quarter. California and Texas are standouts, with additional strong transaction volume momentum in the southeast and west. The largest U.S. metro areas, in particular, are seeing multifamily deal volume accelerate.

 

For more multi-family content, including market forecast and valuation and transaction trends, please contact research@ten-x.com.

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