MULTIFAMILY UPDATE: 5 Key Trends for 2024

With the U.S. housing market in a slump, what’s the state of the multifamily?

While the commercial space remains sluggish, investors are hopeful for 2024. 

Chronic housing shortages have rocked multifamily markets across the country. In the years following Covid, landlords had no trouble keeping tenants and commanding high rents. We even saw rental bidding wars! 

But with today’s shaky economy and more uncertainty on the horizon, people wonder—is the honeymoon over? Is multifamily real estate no longer the foolproof asset class it once was? 

Well, Everest is here to reassure you that the honeymoon is far from over! In fact, there are some very encouraging new developments coming to commercial real estate in 2024 (more on that in a moment). Still, it’s important to remember that no investment is 100% foolproof. 

With economic growth expected to decelerate this year, investors must be on the lookout for good, sound deals and exercise smart strategy in order to achieve multifamily success. 

Let us explain!

State of the multifamily

Despite today’s slightly higher vacancy rates, lower-than-average rent growth, and higher cost for everything, the good news is, demand for housing remains incredibly strong! People see apartment living as an affordable and desirable option compared to owning. 

Nowadays, though, investors have a few reasons to hesitate. Some troubling factors include rising interest rates, supply chain shortages, high insurance premiums, and the inflated cost of virtually everything that goes into constructing and managing a property. 

Yes, these are unfortunate realities. But a look at the greater state of the market reveals a mostly positive outlook. In other words, it’s nothing an experienced commercial investor cannot weather. 

“As reported by Freddie Mac, the multifamily market is expected to remain sluggish in 2024 as it works through what will likely be peak deliveries of new supply for this cycle,” says Motti Klein, loan officer at Everest Equity. “Rent growth is expected to be positive at 2.5%, but still below the long-term average. The same goes for vacancy rates, which are up slightly.” 

According to Mr. Klein, the CBRE still predicts a significant resurgence in investment activity this year as concerns over credit availability and potential recession eventually diminish. While the residential market remains mostly stagnant, it’s looking as though commercial housing could turn a corner—even as the country continues to dodge a recession. 

“In 2023, 70% of multifamily investors in the Americas kept their real estate allocation the same,” notes Mr. Klein. “Another 20% said they planned to increase it. In recent years, multifamily properties have grown to become the prime target of 37% of all American investors and 30% of global investors. That’s a strong vote of confidence!” 

Experts expect to see some compelling commercial real estate opportunities in 2024. High interest rates and economic turmoil can actually lead to excellent bargain pricing for certain assets. And if the Feds finally cease their rate-hiking campaign, even better for investors! 
 

Day in and day out, your friends at Everest Equity are keeping close watch on the commercial market. Do not hesitate to reach out with questions or to explore new opportunities for your portfolio. 

And for those intent on growing their multifamily empire in 2024, check out the following trends. 

5 Multifamily Market Trends for 2024

Smaller units

Throughout the pandemic, it seemed “more space” was the hottest commodity of all. But in response to today’s unique economic challenges, apartments are actually getting smaller. Developers are delivering more 1-bedroom units to increase building density and boost their return on investment. Tinier spaces are also helping to address the sector’s affordability problem. 

Remote work designs

This comes as little surprise, but now that 2024 is here, the verdict is fairly certain: remote work is here to stay. Roughly two-fifths of the American workforce are performing their duties entirely from home. New apartments are prioritizing common areas for both privacy and collaboration. Units are also being built with work-from-home in mind (think: built-in desks, high-speed Wi-FI). 

Amenities overload

Many renters may be strapped for cash, but they’re not willing to let go of life’s little luxuries. Today’s top-performing multifamily properties offer not only the typical sought-after amenities (pool, gym, washers/dryers, storage), but also other high-end extras like salt rooms, pickleball courts, and dog runs. Savvy owners are also finding ways to monetize said amenities.

Community building

Collaborative workspaces and other shared amenities help build a sense of community. But today’s top multifamily developers are taking this philosophy a step further, as tenants are willing to pay more to feel connected. Ideas include transforming greenspace into walking paths; onsite clubhouses with optional membership fees; and outdoor seating near picturesque views.  

Sustainable focus

In today’s top-performing Class A multifamily markets, renters are actually inquiring about the building’s sustainability. In addition to meeting basic code standards, investors are encouraged to implement more energy-efficient HVAC systems, eco-friendly building materials, and solar components. Done right, these upgrades can save you tens of thousands in the long run. 

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