Multifamily property values have increased at an exponential rate that surprised even seasoned industry veterans. After all, 2021 experienced over $335 billion spent on multifamily properties. The record breaking growth doesn’t appear to be slowing down in 2022.
The growth, however, is not blossoming in what was considered commonly sought after urban space. Instead, values have found another sector to thrive in metropolitan and suburban areas.
Multifamily Property Values In Today’s World
Commercial real estate is known to ebb and flow based on the economic state of the nation. Global events, such as the COVID-19 pandemic, allowed the multifamily industry to thrive when many thought the opposite loomed in its future.
At present, the multifamily industry is a booming sector. Popularity in the multifamily industry is still supported by high performance paired with continued investor demand.
According to real estate data firm Real Capital Analytics (RCA), “the RCA Commercial Property Price Index (CPPI) for the apartment sector climbed 23.6 percent year-over-year in 2021—the highest increase on record and even stronger than pre-Global Financial Crisis when investors were purchasing apartment buildings to convert them into condos to take advantage of the overheated residential market.”
Yardi Matrix National Report found that rent rose on average $8 last year, averaging $1604 across the nation. Experts do not believe such exponential growth will carry on through this year, but high performance in January forecast 2022 to produce just as well as its predecessor.
Last year, over 460,000 multifamily units were absorbed (more than twice the amount absorbed in 2020). But where is everyone moving to?
Metropolitan and suburban properties.
Metropolitan and Suburban Popularity
The popularity of urban life is slowly being phased out as people begin valuing the space suburban life can give more of. High rise complexes in the heart of a city are being swapped out for garden-style apartment homes on the outskirts of town.
Keith Misner, executive vice president and co-head of investment sales at Berkidia attributes this change to, “Millennials and Gen Z’s ‘migration to space’ – larger units and smaller cities where there’s more room.”
The Hill noted that large cities known for their popularity and growth (i.e. San Francisco, Los Angeles, Chicago, and New York City) actually experienced a decline in urban growth by a few percentage points.
While there is no predicting the future for multifamily properties, as people continue flocking to suburban towns, the value of multifamily properties will undoubtedly pursue it’s strong upward trend.
Read on to learn more about other commercial real estate trends you should be on the lookout for this year.