Multifamily Market Remains Strong

Multifamily Market Remains Strong

As we start 2022, the multifamily real estate market remains strong. In 2021, the market saw unprecedented growth in rental rates and also in investor demand. Market research from Apartment List showed that rental rates increased 17.8% in 2021, a record shattering rate of growth. Investors were bullish on multifamily properties, due to the sector’s resilience when compared with other types of commercial real estate. Although these trends are likely to continue in 2022, they are not likely to repeat the staggering growth of 2021.

Growth in Suburban and Secondary Markets

In 2022, the highest demand for apartments will likely be in suburban markets and secondary markets. This growth is building on a pre-pandemic trend of renters moving out of major cities. Renters were choosing these non-core multifamily markets due to their affordability and additional space. With the increase in remote work, it is likely that renter demand will only increase in these types of markets.

Slower Investment

Investors similarly going to be more restrained in 2022. Many investors accelerated their investment decisions to 2021, due to concerns about the 1031 exchange and the tax laws. This led to a record number of multifamily transactions and increased demand for multifamily properties. Many investors have Although there are likely going to be fewer transactions than 2021, investor demand for multifamily real estate will remain strong.

Return to Balance

In 2022, the market appears ready to rebalance itself. The staggeringly high rents from 2020-2021 will grow at far more reasonable rates. Apartment List’s data showed a slight uptick in vacancy rates and decline in rental rates in December 2021. This is a sign that the supply of apartments is getting back inline with apartment demand after the eviction moratoriums. Similarly, many investors are starting to express concerns about rising interest rates and the continued cap rate compression. While there is still significant demand for multifamily properties and apartments, 2022 will be a strong year, but not a record setting one.

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