Dive Brief:
- Real estate company JLL found that the first quarter of 2016 was the best ever first quarter report — $34.5 billion — for the multifamily housing market.
- The private equity market has doubled down on multifamily since the first quarter of 2015 and accounted for $8.2 billion in the first quarter of 2016.
- JLL said "suburban, garden-style" properties are the most attractive of the multifamily investment options because those types of developments have the "highest yields" and lower rents. This is a compelling choice for renters who have been priced out of the nearest urban "core" market.
Dive Insight:
JLL said secondary markets across the Sunbelt are performing especially well with price growth in some markets up to 40%. The Western markets of Sacramento, Portland and Seattle are also attractive to investors, as rents there have increased as much as 11% over the last year. In addition, despite price growth, the real estate company said, vacancies are still low, coming in at 4.4% in 2015.
However, JLL also reported signs of a "pullback" in multifamily construction, citing a six-month period of disappointing starts combined with a year-over-year decrease of 12.4% in multifamily permits. In a CMD report earlier this month, the data firm predicted that single-family starts would outpace multifamily in the remainder of 2016. However, this month's Commerce Department report defied conventional wisdom of a multifamily slowdown and reported that spending for multifamily had risen 5.6% in March.
In a webinar earlier this month, National Association of Home Builders Chief Economist Robert Dietz predicted that multifamily will drop 4% this year and see only a 6% gain in 2017. This direction will be spurred along, he said, by millennials who decide it's time to become homeowners, as well as boomers and Gen Xers who are getting back into the homebuying market after losing homes in the recession.