Defining 2021: 3 key trends in multifamily investing

Mike Aiken

A global pandemic, record swings in unemployment and anarchic movements in the stock market have many ready to say goodbye to 2020. With financial planning on the horizon for employers and investors, we looked at the performance of the multi-family housing sector and made various investment forecasts. strategies for next year.

Here are three investing trends to watch as you transition into 2021.

A record year for transactions

It’s impossible to discuss 2020 without mentioning the hurdles of a global pandemic, election uncertainty, and the resulting unpredictable economy. The good news is that we expect much less volatility over the coming year. Why? There have been some bumpy moments for employment and crime in the first quarters of 2020, but we are approaching a more stabilized position as local economies reopen and potential vaccine(s) accelerate the return to a “some normality” by the middle or end. 2021. This stability will bring with it increased job security and more transactional activity. The exact details surrounding asset performance will certainly depend on the pace of job growth, but better days are ahead.

The Congestion of the Southeast Capital Markets

The relative outperformance of the Southeast region, both in terms of employment and multifamily fundamentals, compared to the rest of the United States, encourages investors to refocus. While many of the most active buyers in the Southeast in recent years have taken a more cautious approach to investing in 2020, the demand void has been filled by new investors who have moved away from parts of the northeast coasts. East and West. In many cases, owners and operators of other types of real estate assets are also looking for multi-family dwellings, further increasing interest in our space. We expect for 2021 that the “usual suspects” will return in full to the buyer pool to join new entrants, further compressing investment returns and driving prices above current levels.

Temporary boost for the suburbs

A lingering remote work culture coupled with the desire to live in less populated areas is driving changes in the most desirable real estate markets. Citing the mass exodus for the Bay Area, Dallas-Fort Worth and New York among others from February to June, according to Zillow research, rental price growth has slowed more in urban areas than in suburbs. Additionally, there is a noticeable trend towards residents seeking properties in more suburban areas, weighing the cost-benefit analysis of more space versus commuting distance.

Investors should watch this trend heading into 2021. As states reopen and stimulate the economy, we will soon know if this is a temporary change or something more secular. We have little doubt that many city dwellers seeking refuge in less dense areas will return to town in a post-COVID world to enjoy the urban conveniences that once appealed to them. What is less clear is whether the impact of more telecommuting and therefore less weekly driving time to major infill job centers in the future will “tip the scales” for some and lead to residency. permanent in suburbs and suburbs.

Mike Aiken is the senior vice president of investments at Fogelman Properties. Since joining Fogelman in early 2018, Aiken has spearheaded the growth of the firm’s investment holdings and enhanced its transactional platform. He is responsible for leading Fogelman’s multi-family acquisitions and capital formation through the sourcing, valuation and closing of real estate investments.