Record-Breaking Start to 2022 for U.S. Multifamily Market

The U.S. multifamily sector saw strong momentum at the start of 2022, with robust demographic trends underpinning record leasing activity, rent growth and investment during the first quarter, according to CBRE’s latest report. 

Investment in the multifamily sector increased by 56% year-over-year to $63 billion in Q1 2022—the strongest first quarter on record and bringing the trailing 4-quarter total to $374 billion. Multifamily accounted for 37% of total commercial real estate investment volume in Q1 2022, followed by office at 21% and industrial at 20%. 

In the Pacific region, Greater Los Angeles came in 7th in terms of year-over-year rent increases at 13.9 percent. Orange County landed in 2nd place with 17.7 percent rent hikes and the Inland Empire was 3rd at 16.8 percent higher rents.  

Greater Los Angeles was 4th among all metros for multifamily investments over the past four quarters with $18.6 billion in total volume, 122 percent higher from a year ago and accounting for 5 percent of the U.S. total. The region was sixth in terms of completions, with a total of 11,000 new units delivered during the past four quarters. That compares with 24,800 units completed during the same period in New York and Houston’s 18,500. 

“With continued strong rent growth throughout every Southern California market, ranging from 14-18 percent year-over-year, investors are drawn to multifamily opportunities, despite interest rate pressure,” said Los Angeles-based Executive Vice President Dean Zander. “Los Angeles recorded record volume last year. Based on offerings we have in the market, there is abundant demand for well-located apartment buildings in this tight rental market.” 

He added, “We've noticed a resurgence in tenant and investor interest in markets that had been negatively impacted by the pandemic, including Downtown Los Angeles, Hollywood and other job-centric locations. The Orange County, Inland Empire and San Diego markets command the most attention due to job growth in the life sciences industries, warehousing, distribution and logistics centers, and outpaced rent growth.”

The overall multifamily vacancy rate in the U.S. fell by 20 basis points (bps) quarter-over-quarter and 2.5 percentage points year-over-year to a record-low 2.3%. Average net effective rent increased by 15.5% year-over-year to $2,007 per month. Average rents now exceed their pre-pandemic levels in all but two of the 69 markets tracked by CBRE (San Francisco and San Jose).

New construction deliveries of 66,400 units in Q1 2022 brought the four-quarter total to 292,500—the highest amount since 1987. With more than 400,000 units currently under construction, 2022 deliveries are expected to eclipse 2021.

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