America’s Commercial Real Estate Show recently delved into the multifamily market, a sector that continues to generate significant interest among investors. In this episode, the show host engaged in a fascinating conversation with Carl Whitaker, Chief Economist with RealPage.
The episode kicked off with a reference to the upcoming 2025 C5 Plus CCIM Global Summit, a prestigious real estate event taking place in Chicago from September 16th through 18th. The host, who has been a speaker at this event for several years, endorsed it as an excellent opportunity for professionals in the industry.
The conversation then segued into a detailed analysis of the multifamily market, a sector that has attracted attention from virtually every investment group. The reason for this interest is, in part, due to the steady increase in housing costs, forcing people to explore apartment living as a more affordable option. However, despite the demand, many potential solutions to address the increasing housing costs have not been implemented.
One significant trend identified was the increase in rents over the past years, although this has started to flatten out in recent years. This trend is mirrored in the activity of investment sales, which dropped for a few years due to a rapid increase in rates but is now starting to pick up again.
Whitaker offered insightful commentary on the performance of the multifamily market nationally. Despite a strong demand for apartments, rent growth has not responded as expected due to an unprecedented wave of new supply. However, this supply wave is expected to ease, allowing demand to remain strong and occupancy rates to surpass the critical 95% mark, signifying a functionally full market.
The conversation also touched on the impact of interest rate hikes on new development. The rapid increase in rates has significantly slowed down construction activity, causing a significant drawdown in supply. With demand remaining high, especially in high-growth markets, Whitaker anticipates rent growth to return closer to long-term averages by summer 2026.
Additionally, cap rates were highlighted as another area of interest. Despite a slow return of sales activity, there is a growing appetite for class A investments, particularly in southeast markets.
In terms of opportunities, Whitaker noted that the current market conditions present a favorable environment for development in most markets, particularly Texas, Florida, and the Carolinas. He also suggested that the Class B segment could offer significant opportunities for acquisitions in the second half of the decade.
Hawkins Commercial Realty Local Insight
Bringing the conversation to a local level, Miami, despite not being explicitly mentioned in this episode, is a market that mirrors many of the trends discussed. With its robust population growth, Miami has seen a surge in multifamily development. Yet, like other markets, it has felt the impact of the interest rate hikes, though perhaps not to the same degree as many markets given the influx of population and wealth. Miami, with its positive recent and anticipated trends, surely is one of the more attractive markets for multifamily investment.
In conclusion, the multifamily market continues to present attractive opportunities for savvy investors and developers who can navigate the challenges of supply and demand, fluctuating rates, and shifting demographics. As Whitaker advises, staying informed about economic trends and digging deeper beyond the headlines is crucial for success in this competitive sector.