Workforce Housing Well Positioned to Outperform Market, CBRE Analysis Finds
Strong market fundamentals are attracting a wide variety of investors to workforce housing, creating good returns and helping to preserve affordable accommodation in lower-income communities, according to the latest research from CBRE. Workforce housing has outperformed the overall multifamily market for the past four years, with relatively low vacancy rates and above-average rent growth.
Slow wage growth over the past decade contributing to a high number of potential renters, an extreme lack of new supply, and limited alternative options means strong and sustained demand for workforce housing apartments is expected to continue in 2019, reports CBRE.
The healthy market performance of workforce housing has attracted major investment of nearly $375 billion over the past five years, 51.3% of the total for all multifamily assets. This capital is increasingly coming from unlikely sources, including institutional and cross-border investors.
CBRE’s Brian McAuliffe says, “The balance of the market forces points to continued strength in workforce housing, justifying the strong investment appeal. Investment in this segment also benefits the housing market by preserving much-needed rental accommodations for lower income renters. Value-add investment, in particular, helps to preserve workforce housing inventory directly by improving the physical quality of the asset through renovation.”
Nearly all U.S. metros and submarkets are benefitting from workforce housing’s strong market conditions. The markets with the highest workforce housing rent growth are predominantly higher growth metros. Orlando and Las Vegas lead the country, with 7% rent increases for the year ending Q2 2018. Another eight metros (Jacksonville, Columbus, Tampa, Phoenix, Houston, Inland Empire, Atlanta, San Diego) have growth rates of 4% or more.
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