U.S. Multifamily Market Remarkably Consistent, Remains Top Investment Class

New research by Yardi Matrix and NKF reveal a host of interesting trends within the multifamily sector. Not only has the U.S. multifamily industry exhibited remarkable consistency, it remains a darling asset class for investors.
Rents increased by $5 in April 2019, as robust job creation continued to drive absorption of about 300,000 new units per year, reports Yardi Matrix. The average rent increase represents year-over-year and year-to-date growth of 3% and 0.8%, respectively.

NKF’s first quarter report showed annual effective rent growth increased 10 basis points to 3%, led by above-average growth in Las Vegas, Phoenix, Orlando, Jacksonville and Tampa. Rent growth was particularly strong in the Class B space, which increased 3.4% year-over-year.

Meanwhile, on the investment front, NKF says investment sales volume totaled $36.4 billion in Q1 2019, up 1.3% year-over-year, with more than 70% invested in non-major markets. Trailing 12-month sales volume rose 8.1% to $175.2 billion. NKF writes, Q1 2019 marks the eighth consecutive quarter in which multifamily represented the highest sales volume of all property types.

NKF researchers indicate cap rates decreased 2 basis points quarter-over-quarter to 5.39% nationally, with major markets increasing 3 basis points and non-major markets decreasing 7 basis points. Yields between major markets and non-major markets compressed to 85 basis points, representing the tightest spread since Q1 2013, according to NKF.
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Researchers at Yardi Matrix write in the report, “With the prime rent growth season just starting, it remains to be seen whether this year’s gains will be stellar or merely average, but in any event there seems to be no reason to think the multifamily juggernaut is going to hit the pause button.”

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