In the face of increasing home prices and record-level interest rates, more people are turning to apartment rentals. Deliveries and absorption are on the upswing (with rent growth a mixed bag). However, things have changed on the investment and operational sides.
Newmark’s Q2 2023 United States Multifamily Capital Markets Report revealed an increase in operational expenses while loan origination volumes and acquisition activity declined year-over-year.
Operational Expenses Rise Sharply
Multifamily expenses increased 8.3% year over year due largely to hikes in insurance costs of 28.6%. Other operational expenses such as management also rose by double digits, putting pressure on operations overall.
Investment Sales Drop Significantly Investment sales across all asset classes continued their downward trend with multifamily sales volume dropping 71.8% compared to last year’s figures due to price dislocation between buyers & sellers as well as rising interest rates . Furthermore , loan originations were down 58%, according to RCA data -the lowest since 2014 & below pre pandemic levels . GSE share of multifamily finance grew sharply this past quarter , trending higher than bank , insurance & CMBS lending .
Dry Powder Increases 11 % Closed end funds saw dry powder increase 11 % since start of 2023 thanks largelyto opportunistic funds raising record amounts during Q2 for asset repricing purposes . Returns remain broadly negative but increased slightly with low rise/garden apartments outperforming high rises properties
