The multifamily market has rebounded as swiftly has is stalled last year, but for industry experts the market enthusiasm is no surprise. Multifamily benefits from a renting culture that has driven apartment investment for the last decade—but during periods of economic dislocation, housing shows its resiliency. The pandemic has been no different.
“The biggest factor in terms of the way that it has become back from the pandemic is due to its perceived safety as an asset class,” Mike Procopio, CEO of The Procopio Companies, tells GlobeSt.com. “If you look at real estate in general, the real performers are multifamily, industrial and lab. The rest of the asset classes, in terms of the risk profile, have become unattractive to a lot of core investors. I think you are seeing capital flood into multifamily as one of those safe bets.”
Due to the dynamics of this downturn, a Main Street recession affecting service workers, luxury class-A owners and operators saw little disruption. “During the pandemic, the class-A multifamily, where we play, almost didn’t skip a beat. The class-B and class-C operators were much more impacted by the eviction moratorium and from a depressed collections perspective,” says Procopio.
Class-A apartments, on the other hand, were marked by stability in both rent collections and occupancy. In some cases, these building actually reported rent growth. “If you look at core multifamily, it really continued to perform,” says Procopio. “That goes for urban and suburban product. Our base rents are higher than they were before the pandemic.”
It isn’t only the pandemic-driven fundamentals driving investment in multifamily, according to Procopio. “The pandemic aside, I think that we are seeing trends toward a renter lifestyle. The homeownership component has been decoupled from the American Dream,” he says. “People are very content to rent, and in fact, they prefer to rent and they are willing to pay high dollars.”
The demand for rental living, especially at the high-end of the market, has created a severe supply-demand imbalance. “We are undersupplied; that is very obvious when you see the way that sellouts are going,” says Procopio. We are undersupplied by about 1 million units per year just to keep up with population growth. That doesn’t account for increased immigration that also has an impact on supply.”
These trends are creating a perfect storm for multifamily, and will continue to drive investment volume in the sector well into the future. “As Procopio says, “When you look at those trends, it is hard to see why it wouldn’t be a booming asset class.”
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