Quarterly, Ashland Greene extends a direct invitation to investors, providing exclusive access to its key executives as the executive management team delivers insights into emerging economic trends, strategic initiatives, and investment performance.
The following excerpts encapsulate the 2023 Year End Wrap-Up + 2024 Market Outlook highlights, as presented by Shakti C’Ganti, Founder & CEO, Tyler McWilliams, COO, and Aalok Parikh, Vice President.
2024 Market Outlook & Emerging Trends
The multifamily real estate sector is at a crossroads, navigating a landscape shaped by significant economic shifts and industry-specific challenges. Dubbed “The Great Reset,” this new era is characterized by a convergence of economic, financial, and real estate development concerns, as highlighted by the annual survey conducted by the Urban Land Institute in collaboration with PricewaterCooper (PwC). Investors’ top priorities include fluctuations in interest rates, the cost of capital and the Federal Reserve’s monetary policy and its potential impact on market dynamics.
As the real estate landscape evolves, multifamily investors are eyeing a potential resurgence in transaction activity after a dip in 2023. Indicators suggest a favorable environment for investment in 2024, especially in key growth areas like Dallas-Fort Worth.
Emerging Trends: Tailwinds
The multifamily sector’s resilience and growth potential are bolstered by shifts in cap rates and unit prices, alongside robust fundamentals such as high rental demand and a scarcity of affordable housing. The Dallas-Fort Worth market is particularly strong given its strong economy, population growth and absorption rates.[deleted because this is covered directly below]
Transaction Volume Expected to Increase
Multifamily transaction activity experienced a decline in 2023, marking a downward trend from previous years. Despite this, investor sentiment suggests an uptick in activity for 2024, with nearly 40% of investors expecting increased buying activity compared to last year.* On January 25th, Blackstone, a trillion-dollar asset manager, shared their perspective in an article for CoStar.* According to Blackstone, real estate values have reached the bottom, signaling an upcoming increase in deal activity in 2024. The perspective from the private equity giant gives an optimistic sign.
Price vs Cap Rate
The good news for multifamily real estate investors is that multifamily cap rates have gone up slowly since 2022, effectively lowering the average sales price.* DALLAS-FORT WORTH is undergoing changes in cap rates and price per unit, presenting opportunities for investors. The expectation is that cap rates will go up 20 BPS to 5.5%. Subsequently, the price per door has dropped in DALLAS-FORT WORTH, with the 2024 average expected to be approximately $155,500 per unit—year over year, which is approximately down 8.5% from 2023.
Dry Powder Volume Close to An All Time High
Undeployed capital, or dry powder, at closed-end funds is at near all-time highs, with an estimated $250 billion on the sidelines. Including the amount of dry powder believed to exist in private capital would likely bring the total closer to $350 billion.* As the Federal Reserve begins cutting rates, there’s anticipation that institutions will increasingly funnel capital into attractive investment markets like DALLAS-FORT WORTH. It is believed that while investments may come after an initial rate cut, more significant investments will likely come after the second cut. This influx of investment bodes well for property values, presenting promising opportunities for growth and potential exits.
Multifamily Fundamentals Remain Strong
Multifamily housing exhibits robust fundamentals, with only 25% of households qualifying for a moderately priced home loan, indicating a nation primarily composed of renters.
Consider the significant price gap between renting an average apartment and owning a home; despite mortgage rates slightly declining to just over 6% from last year’s peak, there remains a substantial $1,300 to $1,400 difference. Additionally, there is a need for more than 3M units in the affordable housing sector, emphasizing the significant supply-demand imbalance. These factors collectively underscore the enduring strength of multifamily fundamentals.
Sources:
* Emerging Trends in Real Estate 2024 Survey, UIL Americas. Accessed February 29th, 2024. https://americas.uli.org/emerging-trends-in-real-estate-2024/ & https://knowledge.uli.org/reports/emerging-trends/2024/emerging-trends-in-real-estate-united-states-and-canada-2024
* Real Page
* Real Estate Values Are ‘Bottoming,’ Blackstone Says, Co-Star, Accessed February 29th 2024 https://www.costar.com/article/512456888/real-estate-values-are-bottoming-blackstone-says
* Berkadia 2024 Forecast Dallas – Fort Worth, Accessed February 29th, 2024 https://properties.berkadia.com/2024-forecast/p/9
* CBRE 2024 U.S. Investor Intentions Survey. Accessed February 29th 2024 https://www.cbre.com/insights/briefs/2024-us-investor-intentions-survey
* Marcus & Millichap Research Services BES, BLS Through December 2023
* Marcus & Millichap, 2024 U.S. Multifamily Investment Forecast, Accessed February 29th, 2024. https://www.marcusmillichap.com/research/market-report/multiple-markets/2024-us-multifamily-investment-forecast
* Berkadia 2024 Forecast Dallas – Fort Worth, Accessed February 29th 2024 https://properties.berkadia.com/2024-forecast/p/9
