The multifamily market is expected to see continued strong demand this year following the positive investment activity seen in 2021, according to Berkadia’s 2022 Outlook Powerhouse Poll. A majority of Berkadia’s mortgage bankers and investment sales advisers, 82%, reported that they expect rental demand to continue to outpace supply this year, and 36% said they anticipate multifamily transactions to increase over 2021, despite the potential of rising interest rates and inflation.
Berkadia’s proprietary poll, conducted in December, included 188 investment sales advisers and mortgage bankers in more than 60 offices.
With ample market liquidity, respondents noted they expect multifamily investment opportunities to be abundant this year. For financing deals, 66% of Berkadia mortgage bankers said they expect to see the most activity from the government-sponsored enterprises, with 24% citing private funds and debt funds. On multifamily transactions, 58% of Berkadia investment sales advisers said they anticipate the most activity to be from private domestic capital sources this year.
“As we saw last year, multifamily remained a strong market with major returns compared to other sectors of commercial real estate that continue to face major impacts from the pandemic. With the widespread understanding for the need of quality multifamily supply and sustainability, as well as the enhanced availability of capital and financing sources, the multifamily industry has hopes set high for an even better year in 2022,” said Ernie Katai, executive vice president and head of production at Berkadia.
Secondary Markets Prevail
While gateway markets have started to come back since the start of the pandemic, 94% of Berkadia mortgage bankers and investment sales advisers are in agreement that suburban areas are trending more with renters and investors than the urban locales—and the trend is expected to stay for the coming year. Nearly two-thirds of the poll respondents, 61%, said investment sales activity this year will be highest in secondary markets. Another trend watch: Almost half of the respondents, 48.8%, said they anticipate Class B properties to be of most interest to investors in 2022, while 31.4% predicted Class A assets to be popular.
“Though large cities began making a comeback last year after the initial exodus of renters and investors due to the COVID-19 pandemic, secondary markets are consistently keeping the interest of renters and investors,” said Katai. “The boom in interest of secondary markets is likely here to stay as more people find work opportunities and improvements in quality of life within these markets.”
Increased Affordable Housing Interest
According to Katai, new affordable housing developments, acquisitions, and rehabs look promising for 2022, with increasing investor interest, plentiful capital, and mission-driven lending caps.
An overwhelming 89% of Berkadia professionals said investors are more interested in affordable housing properties, those with low-income housing tax credits or Housing Assistance Payments, now than they were in 2021. In addition, the respondents said the Southeast specifically is expected to see an increase in affordable housing in the next two years.
Almost half of the respondents, 49%, said modifying tax credit policy is a potential solution to help improve the nationwide affordable housing crisis. Nearly a third of the respondents, 31%, said they expect to see affordable housing acquisitions to be most attractive or receive the most investor interest over the next two years, while 29% predicted rehabs of existing affordable housing properties will garner the most interest.
As work-from-home and suburban living has become more appealing due to the pandemic, renters are looking for more space and privacy. In response to these trends, 72% of Berkadia poll respondents said they expect single-family rentals and build-to-rent communities to be most attractive to institutional clients over the next two years.
In addition, ESG investments continue to garner attention. According to Berkadia professionals, 47% said investors are using investment properties to meet their ESG metrics, 23% said investors are converting to energy-efficient properties to address ESG integration, and 17% said investors are hiring appointed ESG members to achieve their goals.