U.S. multifamily market has performed consistently well for several years due to the healthy job market and demographics which have produced robust demand, and little is expected to change in 2020, according to a new market analysis from Yardi Matrix.
With the occupancy rate of stabilized properties remaining near 95% and wages growing at a reasonable level, “rent gains should remain healthy in most metros” in 2020, the report says.
More than 1.5 million units have been delivered over the last five years, and Yardi® Matrix expects new supply of roughly 300,000 again in 2020. Deliveries have slowed in part because of the labor shortage that has lengthened start-to-finish construction times. Supply growth is heaviest in tech centers and popular lifestyle markets such as Seattle, Denver, Raleigh and Nashville.
Investor demand for multifamily is likely to remain insatiable. Transaction volume was just below record highs in 2019, and acquisition yields have stayed at record lows for several years. The sector will remain in demand among equity investors for its stable cash flows. On the debt side, Fannie Mae and Freddie Mac have a combined $160 billion of allocations for 2020, while other lenders including CMBS and private equity are trying to increase multifamily originations.
Affordability is a growing problem and the high cost of rents is “starting to put a strain on increases in many of the higher-cost metros,” according to the report. Other potential tailwinds include slowing economic growth in Europe and China, trade tensions with Beijing and unrest in the Middle East. But barring a major shock, “the fundamentals of supply, demand and cost of capital remain very well balanced and indicate continued steady growth for the foreseeable future.”
Download the Yardi Matrix U.S. multifamily outlook for winter 2020.