Respondents continue to view multifamily as the most attractive type of investment property. On a scale of 1 to 10, multifamily rated a mean score of 7.7, followed by industrial at 7.4, single-family rentals at 7.2 and data centers at 6.9. However, sentiment didn’t come through the pandemic completely unscathed. Views on multifamily pulled back to 7.3 in the 2020 survey and remain slightly below the 7.9 rating that was recorded pre-pandemic in 2019. Likely, the bigger challenges facing dense urban centers are weighing on sentiment somewhat as fundamentals in suburban and less dense multifamily markets held up better than major metros such as New York City, San Francisco and Chicago.
Optimism captured by the 2021 survey also is reflected in a surge in sales activity in the second quarter. According to Real Capital Analytics, transaction volume and pricing have both had a strong bounce this year with $92.1 billion in sales recorded in the first half and sale prices that are up 12 percent year-over-year. “Investor demand continues to be propelled by strong leasing momentum, dry powder and low interest rates. Suburban assets remain the most desirable, but, as markets reopen, investor demand for urban assets has gradually increased,” says Roberto Casas, a senior managing director and multi-housing group leader at JLL Capital Markets.
A common complaint from investors is the challenge in finding good buying opportunities in a highly competitive market. Respondents viewed the biggest hurdles to meeting real estate investing goals as lack of quality deals (49 percent), followed by time required to source/manage deals and lack of capital, each at 20 percent. “Competition is as fierce as I’ve ever seen it, and the lack of quality deals out there is frustrating,” says Lebenhart. Ashcroft Capital looks at about 100 deals each quarter but ends up buying only one or two. The vast majority lack the quality or location the firm is looking for, or are not the right fit for the firm’s value-add strategy. It also is interesting that one out of five investors cited lack of capital as the biggest hurdle. “I was surprised at that 20 percent because financing is extremely aggressive right now on the debt side, and there is increased demand from all levels of equity from individual accredited investors to international pension funds that are looking to deploy capital into the multifamily space,” he says.