In today’s uncertain US commercial real estate (CRE) market, multifamily stands out as a resilient asset class. While we observe short-term trends such as decelerating rent growth, increasing expenses, and lower transaction volumes, it is important to consider them within the context of structural housing-market challenges, including an overall shortage of housing and increasing barriers to ownership. In light of this, we view long-term debt as a compelling option to access the multifamily asset class.
Deceleration in rent growth
Deceleration in rent growth has become a point of concern making headlines in 2023. While factors such as slower job growth, reduced household formation, and weaker in-migration may contribute to the deceleration, our primary focus is on the supply pressures affecting various markets. Generally, we observe that markets with higher new deliveries as a percentage of existing inventory are experiencing slower rent growth (exhibit 1). In the near term, we expect that rent growth in these markets will continue to be constrained as projects in construction reach completion.
Exhibit 1: Nine out of the 10 MSAs with the most supply experienced below average rent growth
Source: Realpage Financial Data. As of June 30, 2023
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