Carl Whitaker, Director of Research & Analysis, Market Analytics with RealPage, joins America’s Commercial Real Estate Show to discuss multifamily rent growth, occupancy expectations, new supply, and when multifamily performance may change. He notes that year over year stats may be negative nationally for September once it is reporting. He thinks that month or October may be the bottom of rent growth numbers on a year over year basis. He notes that urban areas are slowing versus suburban, then continues to discuss various micro and macro multifamily trends and observations.
The Discussion: Exploring the Dynamics of the Multi-Family Real Estate Market
Introduction:
The latest episode of America’s Commercial Real Estate Show delves into the current state of the multi-family real estate market, featuring insights from Carl Whitaker, Director of Research and Analysis at RealPage. The show explores key trends, challenges, and projections shaping the multi-family sector.
Market Overview:
The episode opens with a discussion of the upcoming C5 plus CCI Global Summit, set to take place in Atlanta from September 28th to September 30th. The summit promises a wealth of events, investment opportunities, and learning sessions featuring prominent speakers from various industries, including real estate and basketball star David Robinson.
Multi-Family Market Dynamics:
The main focus of the conversation centers around the multi-family market, which has experienced significant growth in recent years. The episode highlights the interesting trends in the market, including the cooling off of rental rate increases, potential challenges posed by higher interest rates, and the impact of loans coming due at higher rates than initially planned.
Insights from Carl Whitaker:
Carl Whitaker shares valuable insights into the multi-family market, emphasizing the importance of perspective when analyzing year-over-year and year-to-date statistics. While there is evidence of a cooling market, the year-to-date data suggests a more stabilized scenario.
Rental Rates and Occupancy:
The discussion extends to rental rates, with a projection of potential negative rent growth by September. Carl suggests that this period may represent the market bottom, with adjustments occurring due to unique factors such as larger-than-normal rent cuts in the previous year’s fourth quarter.
Urban vs. Suburban Performance:
The urban-suburban performance disparity is explored, with a focus on the varying trends in different suburban areas. Workforce housing areas are experiencing growth, while supply outpacing absorption is observed in certain fast-growing urban markets.
Class Segmentation:
The episode identifies Class A properties as more vulnerable to near-term risks due to the construction pipeline. Interestingly, Class B rent growth has slowed more sharply than Class A in some Sunbelt markets, a trend expected to reverse in the long term.
Build-to-Rent Impact:
The conversation touches upon the build-to-rent sector and its impact on the apartment market. The build-to-rent trend, primarily seen in suburban and ex-urban areas, is considered complementary rather than competitive with the conventional market.
Cap Rates and Distress:
Noteworthy trends in cap rates are discussed, highlighting a recent shift where cap rates are moving up nationally. While distress is noted as a potential concern, it is seen as more isolated, affecting around 20% of the market, with a majority remaining sound.
Future Outlook:
The episode concludes with a discussion on the future of the multi-family market. The ongoing supply-demand dynamics, long-standing under-supply of housing, and a cyclical nature of supply are emphasized as factors shaping the market’s trajectory.
Conclusion:
The conversation provides a comprehensive overview of the multi-family real estate market, offering valuable insights for investors, developers, and industry professionals. As the sector undergoes adjustments, understanding the nuanced dynamics becomes crucial for making informed decisions in the evolving real estate landscape.