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Millennials & Baby Boomers Expected to Drive Multifamily Market in 2019
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Los Angeles-based American Realty Advisors’ Chris Macke shares insights on the multifamily market in our latest 3 CRE Q&A.
Q: What are the top trends impacting the multifamily sector this year?
A: Declining housing affordability, due to rising home prices and mortgage rates, are acting as a favorable demand tailwind for multifamily.
The moderation in deliveries of high-end assets in the top markets is driving increasing rent growth and occupancy as 20 of the 25 largest markets saw year-over-year increases in occupancy among high-quality assets.
Demographics will play an increasing important role, as older Millennials increasingly consider moving into homeownership, while younger Millennials consider moving out of their parent’s basement, and some Baby Boomers seek the freedom and care-free lifestyle that comes from renting.
Q: Has industrial replaced multifamily as the darling of CRE? What key market indicators should investors be watching as they look to invest in the multifamily market?
A: While industrial has been an investor favorite this cycle, and deservedly so, as the current cycle progresses and enters the later stages, astute investors will remember that multifamily plays an especially important role providing greater occupancy stability and opportunities to rebound more quickly subsequent to a downturn.
Q: What markets does ARA view as the most promising for multifamily in 2019?
A: The recent moderation in supply nationally varies significantly across markets and submarkets, as does occupancy rates and rent growth. At this point in the cycle, the basics of supply and demand, along with historical return performance, are the key differentiators that will determine the stars and laggards in 2019 and beyond.
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