Mid-Atlantic Multifamily Real Estate Market Poised to Rebound Once Lending Conditions Improve

In the Mid-Atlantic, despite a decline in multifamily sales volume, strong demand and market fundamentals offer strategic investment opportunities for multifamily buyers and point toward a resurgence beginning in the latter half of 2024, according to a new report from CBRE.

The U.S. Multifamily investment sales market continued at a relatively slow velocity during the first half of 2023, pulling back from the extraordinary peak posted in 2021. In the Mid-Atlantic, sales volume through the first six months totaled just $1.94 billion, a 64 percent decrease year-over-year, and 46 percent below the long-term H1 average since 2014. Despite the decrease recorded in H1, the latter half of the year historically records a higher sales volume, and investors are still active in the market.

“Investors await greater certainty and stability in the capital markets, which has suppressed sales activity. CBRE’s view is for a moderate recession to occur in early 2024, and we expect an end to interest rate hikes as recessionary conditions set in ” says CBRE Executive Vice President Michael Muldowney. “There is a tremendous amount of dry powder waiting on the sidelines, and demand fundamentals remain strong throughout the Mid-Atlantic, driven by recent population and job growth. The region is poised to rebound when lending conditions improve. In the interim, strategic investment opportunities still exist for motivated buyers.”

Employment is the single largest driver of multifamily renter demand. Despite challenging economic conditions and fears of an impending recession, the Mid-Atlantic added 41,500 net jobs since year-end 2022. During the COVID-19 Pandemic, large cities experienced major population declines as residents dispersed to more affordable, less densely populated suburban markets, and there has been some permanence to this trend. The greater Washington region, however, has since shown great resilience, rebounding more quickly than top gateway markets, increasing its population by nearly 9,000 residents between 2021 and 2022.

CBRE’s H1 2023 Mid-Atlantic Multifamily review, highlights the most current and comprehensive data available for the region. Produced by the CBRE Mid-Atlantic Multifamily Investment Properties Team and CBRE Research, this report has been assembled by local experts to empower decision makers and inform those interested in multifamily investments in the Mid-Atlantic.

The Mid-Atlantic Multifamily H1 Report shared additional insights, including:

• As of June 2023, total employment across greater Washington has increased every month since December 2022. Additionally, the region’s job base was 2.4% higher in June 2023 compared to one year ago, and office-using employment grew for the fourth consecutive month.
• Within the region, the District of Columbia, one of the hardest-hit by outmigration during the Pandemic, also rebounded more favorably than other gateway cities, increasing its population by 0.5% between 2021 and 2022.
• The for-sale housing market, which is highly responsive to interest rate volatility, bolstered rental demand during the first half of 2023 as home prices continued to spike. As of June 2023, it is 83% more expensive on a monthly basis to own a newly purchased home than to rent in the D.C. Metro. In the Baltimore Metro, buying a home is 40% more expensive. As young residents continue returning to the urban cores across the Mid-Atlantic, CBRE expects the stark contrast in housing costs to play an even greater role in supporting multifamily rental demand.
• The Mid-Atlantic has more than 34,000 units under construction as of Q2 2023, most of which are expected to deliver by 2025. As a percentage of the entire stock, this is low in comparison to other popular markets around the U.S. Elevated costs of materials and labor, financing difficulties, and supply chain issues are causing delays at many active sites and inhibiting new construction starts. As a result, there will be a significant decrease in new supply. The CBRE Mid-Atlantic Multifamily Investment Properties Team estimates that only 20% to 30% of the proposed projects in the Mid-Atlantic pipeline will deliver as projected. This constricted pipeline will alter supply amidst strong demand.

To download the full report, click here.

CBRE Multifamily National consists of more than 300 dedicated professionals nationally specializing in all aspects of multifamily real estate brokerage and finance, providing investment and advisory services to meet the needs of investors across the multifamily investment spectrum. In addition to offices in 65 cities across every major U.S. market, CBRE also maintains a strong global presence, with offices on nearly every continent offering strategic advice and execution for residential and multifamily assignments worldwide.