Four multifamily trends to watch out for in 2023
#1. How Interest Rates Boost Multifamily Occupancy:
As the Federal Reserve increases interest rates to combat inflation, the multifamily market is seeing unexpected benefits. Higher mortgage loan interest rates and more expensive home purchase funding are causing potential buyers to delay their real estate transactions or wait for the market to stabilize, resulting in longer rental periods. According to the 2022 Midyear Commercial Real Estate Outlook report by JPMorgan, the multifamily market is expected to remain strong due to high home prices and rising mortgage rates, with low multifamily vacancies and increasing rent prices.
#2. Creative Reuse and Renovation Address Affordability Crisis:
The nationwide shortage of affordable housing is expected to continue in 2023, with the multifamily market being impacted. One solution is the creative reuse of other commercial real estate asset classes as multifamily buildings, as well as the modernization of existing multifamily buildings to make them more affordable. The high demand for affordable multifamily units makes this an attractive investment decision.
#3. The Workforce Turns to Multifamily:
As more people return to the office (more about this market coming soon), the demand for metropolitan apartments is expected to remain high. Victor Calanog, Head of CRE Economics at Moody's Analytics, believes that the combination of the national housing shortage and high single-family home prices make workforce housing a promising investment for multifamily investors. Multifamily buildings that target urban areas near professional market hubs and offer strong internet connectivity can attract and retain tenants in the workforce.
#4. The Flight to Quality Persists:
Tenants are increasingly considering the experience that a building or space provides, and this trend is expected to continue in the multifamily market. Buildings that offer high-quality amenities, such as fitness centers and pools, and prioritize the maintenance and upkeep of common areas will be in demand. Additionally, building systems and appliances should be energy-efficient to appeal to environmentally conscious tenants.
I hope the information provided was useful to you. If you have any further questions or need further assistance, don't hesitate to reach out.
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