Market Insight On Multifamily In 2018
Year-end hindsight likely cause many multifamily real estate investors to change their focus this year. The primary markets overheated in 2017, especially in the luxury segment.
At the same time, the 2018 multifamily real estate market is shaping up to be somewhat more nuanced than that of 2017. As investment centers shift across all markets, having expert advice becomes more valuable.
Given the changing market conditions, many multifamily investors are switching investment strategies. The competition for value-add deals is heating up, as investors search for opportunities to reposition Class B and C properties through renovation or management and operational improvements. Tier-two cities and suburban markets are also attracting investor attention.
However, despite some near-term moderation, market fundamentals suggest that, over this next haul, the industry’s performance will likely still be considered very good by historical standards. Apartment demand from Gen Z and baby boomers is expected to be strong and the capital markets should regulate supply, allowing for a healthy and balanced market for the foreseeable future. While the overall market fundamentals look solid over this next stretch, there are a few trends emerging that could spark some significant changes in how we think about financing, designing and building apartment communities. The industry leaders who figure out how to capitalize on them will likely be rewarded.
Recent trends in the real estate market were foreseen well in advance since it became clear early in 2017 that multifamily real estate development starts had peaked nationwide a year earlier. It’s predicted that new apartment deliveries will peak in 2018 and then decrease in line with construction activity. According to one report, apartment deliveries will decline by 11%, or 425,000 units, in 2018, compared to 2017.
This slowdown is a normal market process, and no cause for concern for investors, however. Multifamily housing prospects remain strong, especially in secondary markets, the report concludes.
The top five cities set to receive real estate investment in 2018 are:
3. Salt Lake City
5. Dallas-Fort Worth
These cities are growing rapidly, thanks to their thriving economies that are attracting young professionals. Investors are taking notice.
Finding the Right Multifamily Investment for You
Plenty of new opportunities will emerge as the market evolves. Investors may find themselves venturing into new cities in new regions in 2018, so reliable guidance is more important than ever. Changes in any of these areas will affect multifamily firms’ ability to invest, which in turn could leave a mark on the transactions market and new development.