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Investors Really Like Apartments

Yardi Matrix recently reported that year-over-year rent growth and apartment occupancy were both on the rise during April 2022. According to Newmark’s “1Q22 United States Multifamily Capital Markets Report,” investor demand for the product also increased. Sales volume was $63.0 billion, signifying the largest Q1 on record for the product type.

One reason for the product type’s appeal is due to returns. Multifamily total returns averaged 24.1%, exceeding inflation by 1,560 basis points.

The report also noted the following:

  • Multifamily volume as a percentage of total U.S. commercial real estate was 36.9% during the first quarter. The percentage reached an all-time high of 41.5% in 2021.
  • The average price per unit increased by 20.7% year over year to $246,545 nationally. Major markets, which had declined during the pandemic, recovered at an all-time high of $361,941 per unit.
  • Dallas was the top recipient of capital with $22 billion in sales volume over the trailing 12 months. Major markets in Florida and Texas accounted for 27.3% of total volume over the past year.
  • International investors are coming into the mix; with inflation on the rise, international capital placed 29.8% of their investment dollars into U.S. multifamily in 2021. Year to date, 21.7% of investment dollars have been directed toward apartments in the United States.
  • Cap rates for multifamily decreased 5 bps quarter over quarter to 4.5%, despite an increase in interest rates. The spread between 10-year Treasuries and multifamily cap rates fell to 218 basis points, the narrowest since Q108.
  • Outstanding multifamily debt increased to $1.8 billion, a 2.4% from Q4 2021. Banks saw the largest quarter-over-quarter growth at 3.3%, or $16.5 billion.
  • Dry powder earmarked for investment in all North America commercial real estate hit a record $250 billion in the first quarter. Opportunistic and value-add strategies continue to be the focus of funds that invest in multifamily properties.

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