Multifamily National Trends Report Q2 2022

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It’s no secret that rents are billowing nationwide for multifamily while demand is at record highs. This is largely thanks to swollen housing prices pointing would-be homebuyers to the more reasonable world of renting. 

Multifamily Asking Average Price per Square Foot by Quarter

chart with changes in average asking price per SF by quarter for multifamily property

Multifamily posted the highest valuation growth in Q2 2022 on Crexi, with new listings priced 16.52% more than assets listed last quarter. This growth also represented a $48.93 per square foot pricing increase from assets added the previous year. Despite slight decreases in the second half of 2021, the asset class is likely to see continued activity thanks to its reliable returns.

In response to the market uncertainties, we did observe a slight lift in unpriced listings, with about 17.5% of new multifamily assets not disclosing pricing – the highest we’ve observed since we started tracking. For comparison, multifamily unpriced listings comprised only 10.65% of listed assets a year ago. This shift in pricing tactics could be due to sellers knowing that buyers want a secured investment (multifamily is one of real estate’s finest and a good entry point for new buyers) but wanting to move the conversation on price to later in the negotiation process.

Some concern exists about “build-to-rent” creating too much supply in many secondary and tertiary markets, but we’ve yet to see overall occupancy impacted in top cities. We saw a slight drop in multifamily occupancy, from 88.5% in Q1 to 88.1% in Q2 2022, but overall levels have varied very little in the last six quarters. Meanwhile, development ran full steam ahead, with a whopping 43% inventory increase added to the multifamily sector in Q2, driven primarily by:

-31.7% inventory increase in apartment buildings and 52% increase in single-family rental portfolios

Much of this growth is development deliveries, but many apartment buildings and SFRP landlords were looking to capitalize on quick sales before rising interest rates robbed them of some of their prospective buyer pool.

Multifamily property sales proved the market’s high demand, with a closing cap rate average of 5.1%, making it a tight market for buyers. This represents a slight 10 BPS compression from Q2 2021; it is interesting to notice the shrinking gap between the average asking cap rate and the average closing. Sellers are getting more confident, and properties are selling: about 15.4% of listings reported sold in Q2 2022 were multifamily, comprising 163M square feet and approximately $53.3B in total value.

a chart of Asking vs. Sold Cap Rate for Multifamily on Crexi
Asking vs. Sold Cap Rate for Multifamily on Crexi

Despite the high volume of sales activity happening in the multifamily world, would-be buyers in the sector paused their transaction activity last quarter, resulting in a 14.6% dip in searches. We’re not too concerned, though: multifamily attracted over one million unique leads over the previous two quarters, and the decrease hasn’t put too much of a dent in the sector’s high demand.

Cities with Highest Multifamily Space Demand in Q2 2022

A chart of the best cities for multifamily demand on Crexi in Q2 2022

In the aftermath of the pandemic’s temporary disruption, the U.S. economy faces the headwinds of shifting investment markets, spiking inflation, and reactionary fed rate increases to temper a potential downturn. Despite everything, commercial real estate is a well-positioned long term investment for those seeking to hedge against more volatile times and investors nationwide are still seeking property at unprecedented rates and we’ll likely see this activity continue into the second half of the year.

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Crexi Insights
Crexi Insights

Marketing Team at Crexi

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