Spire Capital has released a white paper examining how US Multifamily is tracking coming out of the COVID-19 pandemic and how the sector is positioned as the US Federal Reserve continues to hike rates.
On the back of a decade of strong performance, US multifamily real estate remains a highly attractive real estate sector, given the structural supply-demand imbalance and the relative rent affordability born out of booming house prices and recent Fed rate hikes. B-Class product, in high-growth cities, has proven time and again its resilience through stress, owing to a diverse tenant base and a highly valuable/affordable proposition offered to long-term renters. The Fed can’t do anything about the supply shortage, and the market can’t do much about it in the near term either, paving the way for what Morgan Stanley Research describes as a ‘vicious cycle’.
As a consequence, the sector continues to be propelled forward by the rise and rise of rents. While the prospect of cap rate expansion lingers, forecasted outsized rent and NOI growth provide a powerful buffer for valuations – potentially prolonging outsized returns.