U.S. MULTIFAMILY
SECTOR TRENDS

With low correlation to market volatility, commercial real estate opportunities continue to be an optimal choice for long-term investors.

The multifamily sector has been particularly resilient throughout the coronavirus pandemic. Both value-add acquisitions, as well as opportunistic development in non-gateway markets throughout the U.S. have exhibited the potential to be the most profitable investment choice during this period of market instability.

Sun Belt markets are experiencing outsized occupancy and rent gains since work-from-home trends have changed renter preferences and migration flows. This has spurred a flurry of investment activity in non-gateway markets from investors seeking new build opportunities with advantageous return profiles in these areas of elevated inmigration. While this historic rent growth will not last forever, the attractive combination of affordability, tax advantages, and employment opportunity will continue to push renters of all types toward non-gateway markets, boding well for future demand.

• In Q3 2021, annual rent growth across all multifamily classes reached 10.5%, well above the 10-year average of 2.8%.
• Sun Belt cities are pushing topline rents as high as 28.7% more than last year, while most gateway markets have trailed the national average.

ANNUAL RENT GROWTH FOR TOP 15 PERFORMING U.S. MARKETS

Source: Costar Advisory Services as of Q3 2021.

Owing in part to the pandemic, job growth, housing prices, and rising inflation, along with key demographic shifts, Class B multifamily housing has emerged as a recession-resilient sector. Rising rents for luxury units have created substantial spillover demand for existing Class B product, channeling investors toward under-valued acquisition opportunities. This significantly under-supplied segment of the multifamily market offers a more attainable price point to a growing demand pool, while also providing rent growth upside for landlords.

• With only 23.2% of the multifamily inventory currently under development in the Class B segment, existing properties can more quickly capitalize on the demand surge.
• The supply/demand mismatch is expected to drive record-level rent growth for Class B above 11.2% in 2021, with elevated levels continuing through 2023.

Ignite provides access to commercial real estate value-add and opportunistic offerings, with a current focus on sustainable investments in the multifamily sector.

The forward-looking information prepared by CoStar Realty Information, Inc. (Licensor) and presented herein is based on information from public and proprietary sources, as well as various assumptions concerning future events that are uncertain and subject to change without notice. Actual results and events may differ materially from those expressed or implied by the Licensor data presented. All Licensor data contained herein speaks only as of the date referenced, may have materially changed since such date, and is provided “as is” with no guarantee or warranty of any kind. Licensor has no obligation to update any of the Licensor data contained herein. None of the Licensor data contained herein should be construed as investment, tax, accounting or legal advice. The Licensor data contained herein speaks only as of the date referenced, may have materially changed since such date, and is provided “AS IS” with no guarantee or warranty of any kind, either express or implied. Licensor has no obligation to update any of the Licensor data contained herein. None of the Licensor data contained herein should be construed as investment, tax, accounting or legal advice.

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