Multi-family Sector Transitions From Recovery to Expansion

Shifts in both economic and demographic factors have led to increased demand for residential rental space, indicating the sector may have moved past recovery and into expansion, according to a recent Cassidy Turley report.

“Since 2006, the number of occupied rental units increased by 3 million, a dramatic reversal compared to the half-million unit loss incurred during the first half of the last decade,” said Rob Reardon, director of research for Cassidy Turley.

More people are choosing to rent rather than buy due to the continuing high unemployment rate nationwide. The one age demographic that has seen an increase in employment, individuals between the ages of 20 and 34, is also the demographic that is least interested in home ownership, adding to the high demand for rental housing.

Multifamily property developers have been slow to respond as the rate of construction for residential rental units remains below the historical average. Reardon predicts that the construction standstill will not last long as demand for rental space continues to increase and capitalization rates in the apartment sector remain lower (around 5.6 percent) than rates in other commercial real estate sectors.

The overall long-term outlook for apartment investors remains favorable and should provide a “very profitable investment opportunity,” the report concludes.

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Source: Cassidy Turely &  CCIM

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