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Amidst the economic backdrop of high interest rates, tight credit underwriting, and threats of an economic recession, multifamily real estate stands out as a golden opportunity despite macroeconomic forces. According to CBRE’s 2024 Global Multifamily Investor Intentions Survey, which includes insights from 1,200 global investors, multifamily real estate offers a compelling investment characterized by growth, resilience and stability. This year, more than half of investors surveyed plan to increase their stake in multifamily assets, which confirms the sector’s bullish sentiment. In fact, the survey found that multifamily is the most preferred investment target this year. An impressive 42% of respondents selected multifamily assets as their primary investment focus, which is substantially higher than the 30% of respondents who selected multifamily last year. Notably, investors aren’t only bullish in the U.S. All major global regions, including the Americas, Europe and Asia-Pacific, all chose multifamily as the preferred sector for investment for the first time in the survey’s eight-year history. What is driving this strong appetite for multifamily investment? There are several factors:
Housing demand remains relatively strong in the U.S. That said, given high interest rates, housing affordability remains near an all-time low. This has driven an increased demand for multifamily apartment rentals. Millennials and Gen Z are also more likely to choose an apartment over a home to rent, opting for a built-in community environment, particularly in urban locales and suburban neighborhoods that are easy to commute to work. These demographic trends have provided a solid and stable foundation for multifamily investing, which tends to shield this asset class from economic downturns relative to other real estate sectors.
Multifamily investments are known for their ability to generate stable and predictable cash flows. Given high demand for multifamily assets, investors in the survey like the resulting consistent rental income that lacks volatility relative to other real estate subsectors. In an uncertain economic environment with market conditions that can fluctuate, multifamily provides downside risk, which can help stabilize returns over a longer-term horizon.
Survey respondents also note a strategic shift toward lower-risk strategies, which includes buying multifamily assets. For example, survey respondents cite a growing preference for core and core-plus approaches over high-risk ventures. They also mention multifamily as an effective hedge against inflation, which is still above the Federal Reserve’s target inflation level of 2%.
This year, multifamily investors continue to focus on the Sun Belt given its economic expansion, warm weather, pro-business climate, and population growth. The CBRE survey highlights multiple geographies that continue to be preferred by multifamily investors in the coming year:
Texas remains highly-desired, given its strong job market, business friendly environment, population growth, stable economy, and multitude of sports and entertainment options. Corporations and residents are also drawn by the lack of state income tax, which continues to draw both constituencies. These factors and other qualities continue to drive demand for multifamily housing in Texas, according to survey respondents.
Atlanta and Charlotte also have strong economies, with significant growth in the technology and financial sectors, which has driven job growth. Further, in addition to attracting Fortune 500 companies and startups, both Georgia and North Carolina have multiple global, prominent research universities. Their warm climate also provides another impetus to attract families.
Nashville and Raleigh-Durham round out top geographies for multifamily investments. Like Atlanta and Charlotte, growth in these geographies is driven by their educational institutions, such as Vanderbilt and Duke, as well as healthcare and technology sectors. These factors help attract young professionals and their families, which has helped to fuel a growing rental market.
The multifamily sector offers a compelling opportunity for investors, including the prospect of stable and recurring cash flows, positive demographic trends, inflation hedges, and downside protection in challenging macroeconomic backdrops. However, more than 80% of survey respondents cite interest rates as a major concern, with tightening credit standards and mismatched buyer and seller expectations as substantial hurdles. Despite these challenges, the Sun Belt continues to offer attractive investment opportunities with its favorable business environment and growing populations, making it a natural fit for multifamily real estate. As investors gravitate toward lower risk, economically-resilient investment opportunities, multifamily assets remain most preferred this year across real estate classes.
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