Mid-Atlantic Research Reflections 2021 - Multifamily

The pandemic not only caused a sudden yet brief pause in capital markets activity, but also a notable shift in sector dynamics and risk profiles. As the “must-have” asset types, multifamily and industrial properties arose as the preferred investment targets. The gradual return-to-work and pent-up renter demand have further activated the multifamily market. Across Class A and Class B assets, rolling 12-month apartment net absorption reached 25,618 units in the Mid-Atlantic—a record high since the start of CBRE’s data tracking in 1994. The robust return in demand has propelled rent growth to 7.6% year-over-year (highest since 2000), while vacancy fell to 3.2%—the lowest since 2001.

Strong occupancy and rent growth has attracted rising investor activity in the Mid-Atlantic from a variety of capital sources including both debt and equity, leading to a record volume of sales transactions. More than $9 billion of assets have traded so far in 2021 with another $5 billion under contract. Median price per unit has risen 27.5% year-over-year while average cap rates have compressed by one percentage point. The upward trend in pricing is driven by record low interest rates for multifamily debt, the rising number of lenders to debt funds, as well as the amount of equity competing for investments. Although apartment rent growth will likely moderate in the coming months, the continued rebound in renter demand should keep the region well-poised for additional growth and investor interest in 2022.