Six Factors Helping to Power Interest in Multifamily Markets
When the pandemic engulfed the world last year, few analysts predicted that the multifamily sector would flourish and thrive so well. Most suspected that the sector would be on life support. Yet, despite a year-long national eviction moratorium, there hasn’t been a better time to be a big apartment-building landlord.
Multifamily-property values have increased 13 percent since before the pandemic and more money is being invested now in apartment buildings than in any other type of commercial real estate. How did this happen and what explains this? Lee & Associates’ research will delve into why the multifamily sector, contrary to past predictions and present-day misperceptions, is flourishing as never before.
1. Measured on an annual basis, national asking rents rose 10.3 percent in August.
That marked the first double-digit increase in the more than 20 years the data of 13 million professionally managed apartments has been collected, and in several cities, the rent increases were much more significant than the national figure.[1] August rents rose more than 20 percent year-over-year in Phoenix, Las Vegas and Tampa. Similarly, monthly rents were up more than 20 percent in comparable markets such as Boise, Idaho and Naples, Florida.
2. Multiple factors explain this rise in rents.
Younger adults who lived with family last year are now renting their own apartments, and middle-income workers who have been priced out of the housing market have few options. If they want to live in an apartment, they must pay higher rents. Moreover, demand for new apartments is outstripping the capabilities of developers to supply them.
3. Apartment occupancy rates hit a record high of 97.1 percent in August.
This is a critical metric landlords use to determine how much they can increase rent. As the occupancy increases, so too does the capability of landlords to increase rents. Additionally, household incomes for new renters at professionally managed properties also reached a new high of more than $70,000 a year.[2] This further strengthens the leverage landlords have over renters.