Why institutional investors are so bullish on multifamily
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There are many reasons to invest in multifamily today. In the wake of the pandemic, investors in the segment are benefiting from significant rent increases, historically low vacancy rates and a very attractive supply/demand imbalance. But institutional investors, inclined to seek security, are mainly attracted by the long-term stability of the asset class.
"We like multifamily because it delivers bond-like returns but adds an inflation hedge because its apartment leases renew annually," says Angela M. Kralovec, vice president of Essex Property Trust. For her, multifamily is the only essential asset class: "People are not going to live in a mall and don't necessarily need an office to work". For this obvious reason, multifamily has become the benchmark for "ensuring sustainable cash flow.
According to Hessam Nadji, CEO of brokerage Marcus & Millichap, the other good news is that multifamily "doesn't have to worry about a construction glut right now." Indeed, the construction labor shortage is becoming increasingly acute, even as employment numbers improve.
As of this writing, interest rates are still historically low and this is probably one of the best times to be interested in commercial real estate (of which multifamily is a part). It's possible that after the hospitality sector recovers, investors will once again take an interest in hotels, which could, to a small extent, rebalance the market.
It is the suburban segment, in particular, that is the most buoyant with massive population movements from the cities to the suburbs.
"When you look at where we are and where we are going, it is easy to see that multifamily apartments are a very attractive form of alternative investment, first and foremost because of the returns they deliver."
Source : GlobeSt
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