Investors Really Like Apartments
One reason for the product type’s appeal is due to returns. Multifamily total returns averaged 24.1%, exceeding inflation by 1,560 basis points.
The report also noted the following:
- Multifamily volume as a percentage of total U.S. commercial real estate was 36.9% during the first quarter. The percentage reached an all-time high of 41.5% in 2021.
- The average price per unit increased by 20.7% year over year to $246,545 nationally. Major markets, which had declined during the pandemic, recovered at an all-time high of $361,941 per unit.
- Dallas was the top recipient of capital with $22 billion in sales volume over the trailing 12 months. Major markets in Florida and Texas accounted for 27.3% of total volume over the past year.
- International investors are coming into the mix; with inflation on the rise, international capital placed 29.8% of their investment dollars into U.S. multifamily in 2021. Year to date, 21.7% of investment dollars have been directed toward apartments in the United States.
- Cap rates for multifamily decreased 5 bps quarter over quarter to 4.5%, despite an increase in interest rates. The spread between 10-year Treasuries and multifamily cap rates fell to 218 basis points, the narrowest since Q108.
- Outstanding multifamily debt increased to $1.8 billion, a 2.4% from Q4 2021. Banks saw the largest quarter-over-quarter growth at 3.3%, or $16.5 billion.
- Dry powder earmarked for investment in all North America commercial real estate hit a record $250 billion in the first quarter. Opportunistic and value-add strategies continue to be the focus of funds that invest in multifamily properties.
Source: ConnectCRE
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