March 6, 2022
Deal Flow For Multifamily Hitting Record Levels
Deal flow for the multifamily asset class has officially hit record levels, as increased competition for assets is pushing investors...

Deal Flow For Multifamily Hitting Record Levels

March 4, 2022 | Lynn Pollack | GlobeSt.com

Deal flow for the multifamily asset class has officially hit record levels, as increased competition for assets is pushing investors into smaller markets.

New research from Marcus & Millichap notes a “historic level of trading activity” in 2021 after a 22% contraction the year before. Deal velocity for apartments at $1 million and above rocketed up 50% in 2021, while rents grew by double digits.

Deal flow was also influenced by investor concerns over possible changes to the capital gains tax, according to Marcus & Millichap analysts. And “abundant investor demand has translated into higher sales prices as a result,” they note. “The U.S. average price per unit rose nearly 9 percent in 2021 to over $180,000. Cap rates have compressed as a result, with the national mean dropping to 5 percent.”

Initial yields for trophy assets in desirable markets traded in the mid-2% range last year, helped along by historically low interest rates. Rates are expected to continue rising this year, however, which will temper yields: “Paired with competition from other parties, this trend will likely drive investors to widen criteria this year, bolstered by a generally recovered economy,” the report predicts.

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