2016 U.S. Multifamily Investment Forecast report released by Marcus &
Millichap
Marcus & Millichap (NYSE: MMI) – According to the 2016 U.S.
Multifamily Investment Forecast report released by Marcus &
Millichap, a leading commercial real estate investment services firm,
the U.S. apartment market is poised for another year of expansion,
marking a seventh consecutive year of rent growth and robust apartment
demand. In 2015, the multifamily investment market willingly absorbed
the largest wave of completed units since the 1980s.
“Demand for apartments has been underpinned by steady employment growth,
positive demographic trends, and modest but consistent wage increases,”
said John Chang, first vice president, research services, Marcus &
Millichap. “These factors have helped tighten apartment vacancies and
push rent growth to an historic high. Even with significant construction
gains, the industry remains hard-pressed to meet demand in several
markets as accelerating household formation combines with the millennial
generation’s continuing preference for rental housing.”
“Both the for-sale housing and rental housing markets are strong,
benefitting from the steady rate of job creation nationwide and
broad-based economic gains,” said Hessam Nadji, senior executive vice
president of Marcus & Millichap in a recent interview with CNBC.
“The housing market and commercial real estate market, generally, are
transitioning from a rapid-paced recovery to a healthier, more
sustainable, normalized rate of growth.”
All 46 markets tracked in the report’s National Multifamily Index (NMI),
are forecast to post continued employment gains and effective rent
growth in 2016. The report notes that while employers are projected to
create 2.6 million new jobs, the expected delivery of 285,000 new
apartment units will track marginally ahead of the level of demand,
resulting in a 10-basis-point uptick in apartment vacancy to 4.3
percent. Even with a slight increase to vacancy levels, rising
employment and wages will support an increase in the national average
rent of approximately five percent.
The Bay Area earned the top two spots in this year’s NMI, with San
Francisco and San Jose occupying the top positions, followed by New York
City. The Silicon Valley benefitted from continued gains in technology
employment and incomes. Rounding out the bottom of the NMI are St. Louis
(#46), Indianapolis (#45) and New Haven-Fairfield County (#44).
“Strong results generated by apartment investments in 2015 will continue
to spark rising activity in 2016 and will encourage investors to broaden
their acquisition criteria beyond core markets,” noted John Sebree,
national director of Marcus & Millichap’s National Multi Housing Group.
“As economic momentum spreads to secondary and tertiary markets,
investors will increasingly pursue opportunities in these areas; this
will in turn offer investors who have held assets in these smaller
metros to reposition their portfolios. The apartment market will be
exceptionally dynamic this year, drawing capital from a broad range of
sources.”
Barring any unforeseen shocks to global financial markets, a wide array
of lenders will remain active in 2016, offering a mix of solutions
suitable for different financing requirements at leverage levels similar
to those in effect last year, according to William E. Hughes, senior
vice president of Marcus & Millichap Capital Corp.
“Life insurance companies increased their allocations to the multifamily
sector at the end of 2015 and promise to become a greater source of debt
in the institutional segment of the market in 2016,” said Hughes.
“Government-sponsored enterprises will also refocus on workforce housing
and smaller niches of the multifamily market. There is also movement in
CMBS issuances which will continue an ebb-and-flow pattern similar to
that in 2015,” added Hughes. “The most notable difference in lending we
anticipate this year as opposed to last is increasing bridge lender
activity in response to the demand for financing for value-add
strategies and asset repositioning.”
For a copy of the 2016 U.S. Multifamily Investment Forecast report,
please visit http://bit.ly/1ZNg4Xj.
For Marcus & Millichap’s latest commentary on CNBC, please
visit: http://www.marcusmillichap.com/about-us/news-events/videos/2015/12/29/cnbc.
About Marcus & Millichap (NYSE: MMI)
With over 1,500 investment professionals located throughout the
United States and Canada, Marcus & Millichap is a leading specialist in
commercial real estate investment sales, financing, research and
advisory services. Founded in 1971, the firm closed over 7,600
transactions in 2014 with a value of approximately $33.1 billion. The
company has perfected a powerful system for marketing properties that
combines investment specialization, local market expertise, the
industry’s most comprehensive research, state-of-the-art technology, and
relationships with the largest pool of qualified investors. To learn
more, please visit: www.MarcusMillichap.com
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