A Confluence of Social and Economic Factors Have Driven Outsized Returns for Multifamily Investors

By Ryan Luby, Henri Torbey, and Brian Vickery

CREIF apartment returns of 3.9 percent in the second quarter exceeded all sectors with the exception of industrial real estate, which saw a shift from brick-and-mortar to online shopping that has reverted back to the prepandemic trend (Exhibit 1). The apartment sector has now returned 24.4 percent over the trailing 12-month period (Exhibit 2). Appreciation accounted for 76 percent and 82 percent of apartment returns in the quarter and over the trailing year, respectively. Net operating-income growth has been the predominant driver of appreciation over the past year, while capitalization rates started the 12-month period at 4 percent, fell to a decades-long low of 3.8 percent at year end, and expanded to 4.3 percent in the second quarter, according to Green Street.

Exhibit 1

Apartment returns in the second quarter exceeded all sectors with the exception of industrial real estate, which reverted to its pre-pandemic trend.

 

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