What trends are shaping the multifamily real estate market this year?
As always this year will bring new design trends, more smart devices and a shift in where the most notable yields and cap rates can be found. Though there are bigger trends in the works, impacting the market and creating new opportunities.
Here’s what to watch…
- Portfolio Restructuring
There is substantial investment portfolio restructuring happening this year. The most obvious is the stock market and pulling out of declining stocks that could dive far deeper in 2019. Not even Amazon and Apple have been able to avoid deep cuts to their market caps. Then there are numerous owners of aging multifamily stock who are at a key moment for exiting before rising interest rates cramp cap rates. The time is right for them to sell. Though the above, together with changing tides in the single-family home and condo market, demand for multifamily assets is only expected to rise this year.
- Capital for Multifamily Deals
Not only is there strong demand for these assets this year, which may bring a new record amount of private and institutional capital, but a great appetite for lending on them as well.
Leverage is still relatively inexpensive for investors, and for lenders, this may be one of the safest sectors to put their clients’ money into. Check out our list of most active commercial real estate lenders here.
- Condo Builders in Trouble
While the US multifamily rental housing industry may be marching ahead with higher valuations and rising rents, the same isn’t true condominiums. NYC seems to be leading the way with overbuilding, overpricing, and in turn a glut of unsold condo new construction units. Builders’ hands are often tied by lenders when it comes to reducing retail prices. One notable unit was recently sold off at a 24% discount. In many ways, these builders have failed to secure a good product-market fit. Expect more deep discounts in this arena. In some cases, these buildings may become ripe for reverse conversions to multifamily apartments.
Coliving buildings have sprung up from both the need for more affordable housing as well as billions of dollars being plowed into a sector that looks like it can squeeze a lot more profit out of smaller footprints. That could be counterproductive if it simply drives up rental prices too fast. Or should it fail to meet what renters want. That could compound the condo issue. Yet, may also bring even more opportunity and greater profits to multifamily owners who can reposition these buildings or have a more desirable product for the long term.
ABOUT THE AUTHOR
Bill Zahller is the President of Park Capital Properties and resides in Asheville, NC. As a Multifamily Real Estate Investor and Syndicator, he founded Park Capital Properties in 2016 after 14 years involvement in real estate investment. He works with accredited investors and professionals who are interested in real estate investment, diversification, and financial freedom.
Bill has been flying since high school. His father was a Naval Aviator and Captain for TWA. Bill has been flying professionally for over 25 years, 23 of those at his current company. He has accumulated over 12,000 hours and 7 Jet type ratings. He has also held Instructor, IOE Instructor and NRFO pilot positions with a large fractional flight company. He is currently flying the Global 6000 in a long range mission capacity. This keeps it interesting – one week its Beijing or Sydney; the next Rio or Rome.
Bill is also the founder of the Asheville Multifamily Investor Club. Visit www.ParkCapitalProperties.com for more information.