Professionals say the availability of capital and institutional investor interest will have a significant impact on industry transactions, according to Berkadia’s 2021 Mid-Year Powerhouse Poll
NEW YORK – August 9, 2021 – Berkadia’s 2021 Mid-Year Powerhouse Poll finds that overall, the multifamily market continues on a positive trajectory, especially when compared to this time last year. Berkadia mortgage bankers and investment sales advisors (78%) are optimistic that by the end of 2021 the number of transactions within the multifamily industry will increase from 2020. The proprietary poll, conducted in July 2021, collected insights from nearly 180 Berkadia investment sales advisors and mortgage bankers across 60 offices to assess expected commercial real estate activity and opportunities for the second half of 2021.
Thus far in 2021, investor interest in multifamily properties has been prominent. In fact, as the multifamily market continues to rebound from the economic volatility of the pandemic, Berkadia professionals say the most prominent investor trend they expect to see for the second half of the year is actively pursuing acquisitions (61%).
Moreover, when asked about the capital source Berkadia investment sales advisors expect to see the most activity from in the second half of 2021, private domestic investors (58%) and institutional domestic investors (32%) rise to the top. Additionally, in terms of the lending source Berkadia mortgage bankers expect to see the most activity from in the second half of 2021 are GSEs (69%) and debt funds (18%).
Industry Need for Multifamily Supply Soars
With the markets thawing from the extreme economic uncertainty seen last year, multifamily investors are back in the game to meet the housing needs of the growing renter population. In fact, Berkadia mortgage bankers and investment sales advisors alike said multifamily rental demand outpacing supply is one of the major trends that will affect multifamily financing and investing in the second half of this year. They also anticipate investor interest to be in Class B (39%) and Class A (35%) properties in the second half this year.
Looking ahead, when asked about the generation that will make up the highest percentage of multifamily renters in the next one to two years, 74% of Berkadia professionals picked millennials (ages 25-40). Multifamily products continue to cater to this generation, as seen through increased tech advancements and amenities within properties. Therefore, unsurprisingly, when COVID-19 and social distancing are fully behind us, Berkadia professionals strongly agree (63%) that the commercial real estate industry will continue to operate digitally more than it did before the pandemic.
“Multifamily real estate transactions may have taken a pause at this time last year, but the length of a market slowdown was much shorter than initially predicted. In the first half of this year, we saw a rebound resulting from the pent-up industry energy and availability of capital, leading to a record-setting start to 2021,” said Ernie Katai, executive vice president and head of production at Berkadia. “Further, an increased desire for the transient, renter lifestyle and migration patterns have led to increased renter demand, and corresponding investor interest, particularly in secondary markets across the country.”
Affordable Housing Interest Continues to Climb
With many Americans still grappling from the economic effects of the pandemic, the need for more Affordable housing across the country remains a top priority for the industry. As such, most Berkadia professionals agree (92%) that investors are more interested in Affordable housing properties now than they were last year.
“Lack of availability of Affordable housing continues to be an issue across the country, and as such, the renewed commitment across legislation, investors and the GSEs presents opportunities for investors to build new properties that meet these requirements or convert existing multifamily properties to Affordable,” said Katai. “Compared to last year, our Affordable transaction volume grew 400% in the first quarter of 2021, indicating that investors are committed to diversifying their portfolios with Affordable properties to support the industry’s effort in solving the affordable housing crisis.”
When thinking about the next one to two years, Berkadia’s mortgage bankers and investment sales advisors said they anticipate the West (32%) and Southeast (30%) regions will see an increase in Affordable housing development. What’s more, Berkadia professionals say they anticipate Affordable housing property acquisitions (49%) and rehabilitations of existing Affordable housing properties (31%) to be most attractive to investors.
Opportunities for Institutional Clients
As institutional investors become increasingly interested in adding commercial real estate investments to their portfolios, Berkadia’s latest Powerhouse Poll also looked closely at trends within this investor group. In today’s real estate market, Berkadia advisors see the lack of deals to purchase (58%), lower risk-adjusted returns (19%) and decreasing cap rates (18%) as the most common pain points among institutional investors. As confidence, stability and liquidity return to the marketplace, respondents expect single family rentals or build for rent (28%) and renovation and rehabilitation (24%) property opportunities to be the most attractive to their institutional clientele over the next two years.
The multifamily industry has also seen a surge of liquidity in 2021 thanks to increased demand. For institutional investors making multifamily investments, Berkadia’s professionals anticipate the Southeast (49%) and Southwest (28%) regions will be of most interest.
“We have been impressed by institutional investors’ continued interest in the commercial real estate industry, throughout the pandemic but particularly as we continue towards recovery,” said Mary Ann King, co-head of investment sales and head of Berkadia Institutional Solutions, powered by Moran. “In today’s ever-changing market, institutional investors are looking to develop a strategy and hang every acquisition onto that strategy to stand out in a competitive market and always be looking ahead. Our new Berkadia Institutional Solutions, powered by Moran, platform continues to support the evolving acquisition and investment portfolio needs of these clients throughout the country.”
About the Powerhouse Poll:
The 2021 Mid-Year Powerhouse Poll data was collected in an online survey by Berkadia through Microsoft Forms in July 2021. The sample was based among Berkadia’s 60 offices throughout the U.S., consisting of 65 investment sales brokers and 114 mortgage bankers, totaling 179 overall respondents.