Berkadia Finds Multifamily Optimism Despite Ongoing Economic Uncertainty

The multifamily sector is performing better than anticipated during the pandemic, increasing optimism for the future among mortgage bankers and investment sales advisors, reported Berkadia, New York.

The annual Berkadia Powerhouse Poll interviewed nearly 150 people in December. While acknowledging early anxieties surrounding the pandemic, two-thirds of those surveyed said commercial real estate fared better than they expected and 85 percent said they anticipate the pandemic and ongoing economic uncertainty will have “only somewhat or little” impact on deal closings this year.

“The multifamily industry is one of many that faced challenges last year due to the COVID-19 pandemic,” said Berkadia Executive Vice President and Head of Production Ernie Katai. “CRE professionals were forced to rethink their business operations and reimagine how to interact with and support their clients. It was an unprecedented year.”

But Katai said he believes 2021 will be “a year of recovery and growth from a fundamentals perspective for the multifamily industry.”

When asked about the most prominent investor trends in 2021, survey respondents said they anticipate investors will be actively pursuing acquisitions (49 percent), seeking immediate financing on currently owned properties (22 percent) and turning their attention toward new property types not previously in their portfolio (8 percent), the report said. As such, and despite the fluctuations both up and down over the past year, 52 percent of respondents said they expect commercial real estate capital conditions could return to normal by year-end.

Katai noted “record-breaking” private real estate equity fundraising in the past few years, with $83 billion raised in 2019 and $23 billion raised through June 2020 according to data firm Preqin, London. “We expect to see strong investor interest in multifamily, particularly from institutional, private and foreign investors who are currently weighted heavily towards the hospitality, retail and office sectors looking to diversify portfolios due to its prospects for stability and return on investment potential,” he said.

Given the economic hardships and uncertainty from the COVID-19 pandemic, investors have shown an increased focus on affordable housing properties, the report noted. More than 90 percent of people surveyed “strongly or somewhat” agreed that investors are more interested in affordable housing properties now than in the past.

“Americans are still facing economic insecurity because of the pandemic, a reality that has only worsened our national affordable housing crisis,” Katai said. “This past year has intensified the need for affordable housing, especially for the essential workers in the cities across our country who cannot work remotely or relocate to suburbs in order to reduce rental costs.”

When asked about potential solutions to alleviate the current affordable housing crisis, survey respondents ranked modifying tax credit policy (45 percent), increased investor prioritization (16 percent) and regulatory changes for Fannie Mae and Freddie Mac (14 percent) as the top sources for potential relief. Furthermore, mortgage bankers and investment sales advisors said they anticipate Class B (49 percent), true affordable (16 percent) and Class C or true workforce (14 percent) will be the housing property types most interesting to investors in 2021.