USA National Multifamily Market Report as of January 15, 2024

[Manuel Angeles]

Greetings,

This is Manuel Angeles with Exp Commercial.

Here is an update on the current National Commercial Multifamily Real Estate Market in The United States of America:

Multifamily investment activity dipped below $100 billion in 2023 for the first time since 2014. After peaking in the second quarter of 2022 at $316 billion, trailing 12-month transaction volume finished the year close to 70% off the recent highs.

As interest rate volatility whipsawed the capital markets last year, a noticeable shift in buying patterns saw investors move up the quality spectrum. The reason for the upward reach is at least twofold. The first is the opportunity to acquire high-quality assets that are marked down over 20% compared to peak pricing in the first quarter of 2022. The second is a growing desire to manage risk through owning better-quality assets where unexpected capital expenses are less likely. In the 3- Star property segment, price declines were less pronounced, falling about 15% from the peak where deals once traded for approximately $210,000 per door.

In addition to asset quality, investors adapted their approaches to stay ahead of rent growth, leading to noticeable shifts in sales volume rankings. The buying frenzy of the second quarter of 2022 propelled national transaction activity, with cities like Atlanta, Phoenix, New York City, Los Angeles, and Washington, D.C., taking the lead. However, subsequent increases in interest rates caused a substantial reshuffling, reestablishing New York and Los Angeles as the dominant players. Meanwhile, previously thriving markets like Atlanta and Phoenix experienced decreased transaction volumes due to the steady influx of new supply and stagnant rent growth.

In the aftermath of the pandemic, institutional capital was in the spotlight, surpassing private-buyer activity as they outmatched lesser-known names while competing in the same arena. Yet, as interest rates rose, institutional capital took a breather, which allowed private buyers to gain market share in 2023.

Pricing trends have also experienced discernible changes. Loan-to-value (LTV) ratios, once commonly found at 70%-80% with 3%-3.5% interest rates, have now slipped to around 55%-65% LTV with high-5% to mid-6% interest rates. Therefore, sellers increasingly offer debt assumptions to preserve disposition targets and supply greater financing certainty to their buyers.

As property values decline, rising yield requirements are diffusing across assets of varying quality and vintages. These spreads were flattened during the buying spree in 2021 but are re-emerging with rising uncertainty. Currently, cap rates for many 4 & 5 Star assets fluctuate in the mid-5% range, while 3-Star assets have broadly climbed toward 6%. Older, less luxurious assets are now pushing north of the 6% threshold.

With a significant stake in the $4.5 trillion commercial real estate mortgage debt, the multifamily sector anticipates a modest increase in loan maturities this year, with obligations of $255 billion and $243 billion in 2024 and 2025, respectively. Remarkably, despite these ongoing shifts, delinquency rates remain low on a relative basis when compared to the office, retail, and hospitality sectors.

Although factors such as declining household formations, rising supply deliveries, and weakening demand may present temporary obstacles, the sector has successfully emerged from similar challenges in the past. The ability to adapt and evolve reinforces its continued importance in the commercial real estate landscape, emphasizing the significance of a mindful strategy to navigate these ongoing shifts.

Here are several graphs illustrating the current national commercial multifamily market in The United States of America:

Full Commercial Multifamily Market Report Here: https://d2saw6je89goi1.cloudfront.net/uploads/digital_asset/file/11... 

 

Access Exclusive Commercial Real Estate Market Reports in The United States Here: http://usacre.manuelangeles.com/

Please contact me for:

• Any questions, comments, or concerns regarding the commercial real estate market in The United States
• Markets reports in specific county for multifamily, retail, office, industrial, or hospitality properties
• Complimentary market analysis and valuation reports for your commercial property
• Up-to-date current commercial real estate listings (on-market and off-market)

Schedule a time for a call or meeting with me here. 
We are here to assist you in achieving your commercial real estate investment goals and maximizing your return on investment and equity.
I wish for you and your family a Peaceful & Prosperous 2024.
Please let me know how I can be of service.
Thank you.

--

Best Regards,

Manuel Angeles
Broker Associate
CalDRE #01985856
Mobile: [phone]
Email: [e-mail]
Website: www.manuelangeles.com
Address: 155 N. Lake Avenue, 8th Floor, Pasadena 91101

Exp Commercial of California, Inc.
CalDRE #02134436  
Office: [phone], ext 300
Website: www.expcommercial.com
Address: 2603 Camino Ramon, Ste 200, San Ramon, CA 94583
  
| Commercial Real Estate Brokerage: Multifamily, Retail, Office, Mixed-Use, Industrial, Hospitality, Self-Storage, Land |