‘Sustained’ Confidence Among Multifamily Brokers, Mortgage Bankers

The rest of 2018 should see strong multifamily real estate activity, Berkadia’s Mid-Year Powerhouse Poll said.

The firm’s July poll asked more than 150 investment sales brokers and mortgage bankers to assess opportunities in the multifamily space for the rest of the year.

“The multifamily space is the land of opportunity right now, and we don’t see that waning any time soon,” said Berkadia Executive Vice President and Head of Production Ernie Katai. “While we may not have seen as many big blockbuster deals during the first half of the year as in years past, production remains steady on both the investment sales and lending sides of the coin, and industry-wide, we expect that activity to remain strong.”

At the start of 2018, most mortgage bankers and investment sales advisors Berkadia surveyed did not expect multifamily lending and investment activity to decrease year-over-year despite several potentially disruptive factors including rising interest rates and an uncertain political environment. Respondents remained confident at mid-year in the multifamily sector’s performance. Most–70 percent–said that by year’s end, multifamily industry deal volume will either increase or stay the same and 67 percent said the same about the number of multifamily transactions.

More than 70 percent of respondents said multifamily will be more active than other commercial real estate sector for the remainder of the year and 81 percent said that their outlook now is either more positive or the same compared to the beginning of the year. This confidence remains despite most respondents (70 percent) saying rising interest rates have “somewhat or definitely” affected commercial real estate lending and investment sales activity this year.

“At the start of 2018, we were all fairly certain that the Fed would raise interest rates a few times over the next 12 months,” Katai said. “Despite this anticipation, we’ve certainly seen an impact on deals this year, particularly on the lending side where there has been an added stress on refinancing. That said, many economic factors including robust hiring and a rise in the labor force have kept investment sales deal flow strong.”

Nearly 90 percent of respondents said they still expect the government-sponsored enterprises to provide most of the sector’s financing in the remainder of the year. But that could change if federal government policies regarding the GSEs change, Katai said.

“While there is no indication that the GSEs will be restructured in the immediate future, it’s been under discussion by our current administration and would certainly have an impact on the lending landscape,” Katai said. “Certain sectors in particular such as affordable housing should keep an especially keen eye on possible government action.”

On the investing side, more than 85 percent of respondents said domestic capital will lead the way for investments for the rest of 2018, with domestic private investors accounting for 60 percent and domestic institutional investors accounting for 26 percent. While most capital is expected to come from the U.S., foreign investors have displayed interest around other property sectors such as student housing.

“There’s a very real faith in the strength of the U.S. market, both at home and abroad,” Katai said. “Foreign investors, particularly from Canada and Asia, are becoming quite comfortable with the student housing sector. As U.S. colleges and universities gain more and more recognition across the world, cross-border capital is more likely to flow into properties near those institutions.”