In the face of increasing home prices and record-level interest rates, more people are turning to apartment rentals. Deliveries and absorption have increased (with rent growth a mixed bag). On the investment and operational sides, however, things are a little different.
Newmark’s Q2 2023 United States Multifamily Capital Markets Report reveals that multifamily expenses rose 8.3% year over year due to hikes in insurance costs at 28.6%. Other operational expenses (management and others) also saw double digit increases putting pressure on operations.
Investment sales across all asset classes declined with Newmark analysts reporting that multifamily sales volume dropped 71.8% year over year due to price dislocation between buyers and sellers as well as rising interest rates . Furthermore, loan origination volumes have been consistently below pre-pandemic levels since March 2022 with $75 million+ deals experiencing the largest expansion in transaction cap rates according to RCA data from Newmark analysts . This resulted in debt originations falling by 58% compared to last years first half of 2023 -the lowest since 2014-. GSE share of multifamily finance grew sharply this period trending above bank , insurance , CMBS lending .
Dry powder at closed-end funds has increased 11%, likely attributed by record fundraising for opportunistic funds during Q2 2023 looking capitalize on asset repricing while returns remain broadly negative but improved slightly ; low rise/garden apartments outperforming high rises properties
