It doesn’t seem like that long ago that we were together for NMHC 2021, and in truth, it’s only been six months since last year’s annual meeting was postponed to June. But wow, what a six-months it has been! Last year was a record year for the multifamily industry—it experienced a 75 percent increase in sales year over year—and for Berkadia—we closed more than $67 billion in combined investment sales and mortgage banking volume!
Of course, now we find ourselves in the midst of another rise in COVID-19 cases, which only makes us all the more grateful to be able to get together in person (and virtually) with our colleagues and friends. And one of the things we’re most excited about is celebrating what an impressive year 2021 was and the palpable momentum we have going into 2022. Apartment sales have skyrocketed from approximately $22 billion in 2001 to $256 billion in 2021 and we only see capital flows into the sector continuing to grow. With that in mind, a few key topics are at the top of our agenda in the days ahead.
COVID-accelerated trends are here to stay
To say COVID has impacted our industry is an understatement—though now in the past, the near complete halt in sales activity from March 2020 to June 2020 is hard to forget. But, after the past year, we’ve seen COVID’s impact create new opportunities and accelerate trends that have had a positive impact on the multifamily market.
Without a doubt, COVID has accelerated suburban migration, and as a result, the geographic dispersion of capital in the apartment sector, a trend that was already well underway. Additionally, single family rentals have transitioned from a niche investment to one of the hottest and fastest growing investment products, as COVID work from home parameters have renters in search of more living space. We expect these trends to sustain through 2022.
Perhaps no topic is more top of mind headed into NMHC this year than inflation. With it hitting the fastest pace since 1982, investors and owners are rightly looking to understand how to best position their portfolios and investment strategies to endure an environment that is here to stay, at least for the short term. It’s something that our Research team has been digging into—see our recent white paper: A Better Way to Assess Inflation and Risk in Real Estate—as we arm ourselves with the best insight and advice to guide our clients.
Typically, multifamily is considered an inflation hedge because the shorter-term leases afford more flexibility to owners. So, while of course we’re watching inflation, and the Fed’s response closely, we’re optimistic that the appetite for apartments will remain strong from all types of investors.
Growth for good
Environmental, Social and Corporate Governance (ESG) investing is an increasingly important consideration for investors—the percentage of both retail and institutional investors that apply ESG principles to at least a quarter of their portfolios jumped from 48 percent in 2017 to 75 percent in 2019, according to BNP Paribas CIB’s 2019 ESG Global Survey. The multifamily market offers abundant opportunities to meet ESG parameters, from buildings going “green” and instituting sustainable initiatives to providing critical affordable housing solutions. We expect to see more investors seeking multifamily opportunities that offer both investment and ESG upside and we’re optimistic about the role multifamily investing can play in providing maximized value and returns for investors, owners and tenants.
With this in mind, we’re using NMHC as an opportunity to do a little good ourselves. Unfortunately, we had to cancel our annual reception, which we always look forward to as an opportunity to share a meal and make some memories with our friends and clients. After a challenging year for many, we recognize more than ever the importance of gathering around a table, so we’ve made a donation to Second Harvest Food Bank of Central Florida in hopes that more people will be able to share in a good meal with family and friends this year.
We’re thrilled to be back on-site, albeit with a smaller cohort and more virtual colleagues, at NMHC 2022. The knowledge, insight and perspective we gain from our conversations is invaluable as we seek to bring the best advice and strategic resources to our clients in the year ahead. But most of all, we’re thrilled to be kicking off what we believe will be another great year for the multifamily industry.
-Keith Misner, EVP and Co-Head of Investment Sales