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Some California Multifamily Sectors Recovering Revival Fastest in Inland Empire, Sacramento Markets

Source: California Buildings News • Q2 2021



The multifamily market is rebounding from the pandemic at a rapid clip, and gateway markets are now seeing positive performance indicators for the first time in many months. The latest Yardi Matrix Multifamily National Report has much good news for owners and investors, including a 1.6 percent year-over-year rent bump.


“That is the largest increase that we have seen since the beginning of the pandemic,” said Matrix analysts. Overall rents increased by $10 in April to $1,417. The last time overall rents increased by that amount in a month was June 2015. It was also the largest year-over-year jump since March 2020. Out of the top 30 markets Matrix reported on, 24 had month-over month rent growth greater than 0.5%. Of particular significance were the gains in gateway markets. Miami leads the gateway markets with 0.8% rent growth on a trailing 3-month basis. All other gateways had positive trailing 3-month rent growth, with Chicago (0.5%) and Boston (0.4%) showing strong gains. Washington, D.C. (0.2%), New York, San Francisco and Seattle (all 0.1%) are further back in the recovery process. National rents increased by 1.6% in April on a year over-year basis—a huge jump from the 0.6% gain in March. Every major metro continues to show improvement on a year-over-year basis, and 21 out of our top 30 metros had positive YoY rent growth this month. The Inland Empire (9.4%), Sacramento (8.4%) and Phoenix (8.1%) retained their longstanding positions at the top in April. Gateway markets like New York (-12.6%), San Jose (-10.8%) and San Francisco (-7.7%) remain at the bottom, but monthly numbers point to a rebound. Meantime, CBRE says, “With steadily improving market conditions, multifamily investment volume is expected to increase in 2021. CBRE Research predicts U.S. multifamily investment volume will reach about $148 billion next year, lower than 2019’s record level of $191 billion but a 33% gain over the 2020 estimate of $111 billion.


Investor demand for multifamily assets this year was more than previous recessions would have indicated. Pricing held up quite well. Still, many investors moved to the sidelines as the COVID-19 pandemic spread. With greater clarity on future revenue streams, institutional buyers and value-add investors should become much more active next year. Offshore buyers likely will increase their activity, especially if travel restrictions are eased. Multifamily segments that had greater market deterioration in 2020—such as Class A assets in urban submarkets, particularly in gateway cities—may not stabilize until well into 2021 and present more investment risk. Buyers may seek pricing discounts for such assets, but significantly discounted pricing will remain difficult to find. The most impacted metros in 2020 were San Francisco, San Jose and New York. Other underperformers included Los Angeles, Boston, Seattle, Oakland, Austin, Miami, Chicago, Washington, D.C. and Orlando.


The opinions, forecasts, educated comments, and predictions expressed in this article are a reproduction of the article appearing on the California Building News – Q2-2021. GT/AD Studio makes no claims or assertions about the validity of the same.


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