2020 will be one of the growth and great opportunities for the U.S. multifamily sector, which projects to remain one of the most
desirable asset classes.
Experts in every area have high expectations because of the robust American economy. Job growth continues to rise, domestic and foreign investment is increasing, the industrial sector is expanding, plus infrastructure development legislation has loosened. Growth investment opportunities in private real estate are available this year, as long as we understand changing trends in the real estate market.
Real estate is driven by demographics; its investment trends generally favor multifamily, which has been one of the primary beneficiaries of the ongoing population growth fueling commercial real estate in the Southeast. In the USA, millennials (23 – 38) are the largest adult generation. Although they are making more money than previous generations at the same age, they are renters. On the other hand, we have 693 million Baby Boomers (56 – 74) worldwide who are more likely to sell their properties and become renters by choice. Industries and corporations relocation from Northeast to Southeast has been a fundamental fact for demographics growing. They are seeking for good weather, infrastructure, and an attractive live-work-play environment.
The U.S. economy added and 145,000 in December, according to the Bureau of Labor Statistics, and the unemployment rate was unchanged at 3.5 percent. During the past 12 months, employment rose by 2.1 million jobs, and wage growth increased by 2.9 percent. Southeast states are growing well above the national average. While the concentration of tremendous growth in manufacturing jobs and wages brings more demand for housing, and workforce products will continue to be a significant focus in the apartment market.
Private equity funds are likely to increase commercial real estate investment. Extended low rates pave the way for preferred equity investments, which offer robust dividend payments and diminished risk to investors.
Most private investors are getting multifamily, financial markets and international events have turned volatile, creating a lack of confidence in the public markets. We are still seeing new private capital entering the Southeast multifamily markets. Mortgage Bankers Association (MBA) is predicting another record-breaking year in multifamily lending. For instance, low-interest rates, strong fundamentals, and stable property values will translate into another growth year.
As a value-added investment, the demand for multifamily housing will remain secure. We expect high prices to continue, and low cap rates to stay. For several years, the average national occupancy rate has remained above 95%, and current trends in demographics and demand support rental housing. For the next couple of years, affordability is the new driver, since rents are low enough to withstand raises, making multifamily an excellent investment. Most consumers and larger institutions are now getting on board, from a product-type viewpoint, they know it’s proven to be historically recession-proof.
Capitaliza is very optimistic about 2020, always seeking for new horizons, a fresh start with great opportunities. We will continue to run our selective four-steps investment process. Identify markets with the most beneficial demographics and growth characteristics, negotiate to achieve the best relationship price – value in our acquisition, administrate income of the properties to its maximum potential, and capitalize on investments to distribute the utilities.