Multifamily Real Estate Professionals Expect Increased Activity

Nearly 80 percent of investment sales advisors and mortgage bankers surveyed by Berkadia, New York, are optimistic multifamily transactions will increase from last year by the end of 2021.

The twice-annual Berkadia Powerhouse Poll interviewed nearly 180 real estate professionals about their expectations for real estate activity and opportunities for second-half 2021.

Ernie Katai

“Multifamily real estate transactions may have taken a pause at this time last year, but the length of a market slowdown was much shorter than initially predicted,” said Ernie Katai, Executive Vice President and Head of Production with Berkadia. “In the first half of this year, we saw a rebound resulting from the pent-up industry energy and availability of capital, leading to a record-setting start to 2021.”

Katai said investor interest in multifamily properties has been prominent this year. In fact, as the multifamily market continues to rebound from the economic volatility of the pandemic, people surveyed by Berkadia said the most prominent investor trend they expect to see for the second half of the year is actively pursuing acquisitions (61 percent).  

With many Americans still grappling with the pandemic’s economic fallout, most survey respondents–92 percent–agreed investors are more interested in affordable housing properties now than a year ago.

“Lack of availability of affordable housing continues to be an issue across the country, and as such, the renewed commitment across legislators, investors and the GSEs presents opportunities for investors to build new properties that meet these requirements or convert existing multifamily properties to affordable,” Katai said. He noted Berkadia’s affordable transaction volume grew 400 percent in first-quarter 2021.

As institutional investors become increasingly interested in adding commercial real estate investments to their portfolios, Berkadia examined trends within this investor group. It found the most common “pain points” among institutional investors are a lack of deals to purchase (58 percent), lower risk-adjusted returns (19 percent) and decreasing cap rates (18 percent).

When asked about the capital source investment sales advisors expect to see the most activity from in the second half of 2021, respondents said private domestic investors (58 percent) and institutional domestic investors (32 percent) rise to the top. The lending sources mortgage bankers said they expect to see the most activity from are the GSEs (69 percent) and debt funds (18 percent).

“As confidence, stability and liquidity return to the marketplace, respondents expect single-family rentals or build for rent and renovation and rehabilitation property opportunities to be the most attractive to their institutional clientele over the next two years,” the poll said.