The year 2021 looks promising for a full recovery within the multifamily sector. Although the COVID pandemic caused huge losses and unprecedented economic damage, the CBRE forecasts that by early 2022 there will be a full market recovery.
Since the economy is beginning to slowly improve, the people that chose to move back in with parents, or with friends in order to save money will be ready to get back into their own apartments and start living somewhat normally again. Over the next several months we will begin to see:
- Vacancy levels back to pre-COVID numbers
- Increase of 6% net effective rents
- Rising multifamily demand
Development of multifamily units will continue to thrive forward and is predicted to reach an extra 280,000 units in addition to the estimated 300,000 total for the year. The CRBE believes that this increase of available vacancies will forge an improvement to the current number of vacancies and slowly climb back to a healthy rate.
Factors such as income, remote working, lack of available recreation, play huge roles in the economy of the country then create challenges for the multifamily industry.
Reduced income and loss of employment have caused many renters to move out to affordable homes, or to not be able to pay rent. With the economy beginning to rise up once again and many of the industries are recovering there is newfound hope in the near future.
The Urban Issue
The urban areas were affected more severely than the suburban areas. Now that local stores and restaurants are opening back up, the suburban markets are in the position to bound out of the recession, while the urban areas will slowly follow behind.
Many of the urban amenities such as stores and restaurants were closed down for long durations of time which made renters move outward to the suburbs where they could still have some entertainment and fun. Some of the problems that caused the lag in rebounding are:
- Avoidance of public transportation
- The need for more living space
- Wanting more access to the outdoors
- Living close to the office irrelevant because of remote work
Expected Increase of Multifamily Investment 2021
As the market conditions continue to improve, multifamily investment should increase in 2021.
CBRE Research believes that the total volume for multifamily investments will reach close to $148 billion. Although this is considerably lower than the $191 billion in 2019 it is a substantial improvement from the $111 billion that 2020 brought in.
Although there were substantial losses and many uncertain moments throughout the last year, it is expected that more investors from around the nation and even from offshore places will be much more active this year.
The forecast of multifamily investment growth for 2021 will be a 33% increase from last year.
2021 Investment Strategies
Some of the best opportunities will be in the Midwest and Southwest areas. The cities that look the most promising are:
- Indianapolis
- Memphis
- Detroit
- Columbus
- Cleveland
- Cincinnati
- Kansas City
- Louisville
- St. Louis
The Southwest metropolitan areas that could be good prospects are:
- Greensboro
- Jacksonville
- Richmond
- Virginia Beach
- Atlanta Charlotte
- Raleigh
- Tampa
Some of the communities that were faced with significant loss and deterioration are considered to be a bigger investment risk than others. Some of these areas are:
- San Fransico
- San Jose
- New York
- Los Angeles
- Boston Seattle
- Oakland
- Austin
- Miami
- Chicago
- Washington DC
- Orlando
Other areas that will be on the investor’s raiders because of the way that they performed through the pandemic are:
- Phoenix
- Dallas
- Ft Worth
- Denver
All in all the multifamily did not suffer as greatly as it could have, and a rebound is currently in process. As the economy continues to improve the future of multifamily looks brighter each day.