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In the past year, the norm for the whole world virtually changed. The pandemic shifted many aspects of daily life, including how we shop, learn, where we work, and in many cases, how we live. The multifamily real estate investment market has also seen change. Though multifamily properties remain a popular choice with investors due to the opportunity for passive income and the steady demand for housing, it’s important to be aware of market trends looking into the tail end of 2021 and beyond.
Renters are Seeking Dedicated Spaces for Indoor and Outdoor Living
Much of the U.S. workforce has continued to work fully or partially remote in 2021, many by choice. It's likely that remote work will continue to be the new normal, which will ultimately change the ways renter's shop for homes. A study from the National Association of Home Builders found that 80% of homebuyers listed a backyard patio as “essential” in a new home. Renters are seeking similar amenities, especially as people are putting off buying their first home in favor of renting until the economic uncertainty from the pandemic levels out (more on this below). Dedicated spaces like home offices are also in demand, as people continue to work remote and want to separate their living and working spaces.
Increased Rental Demand
As mentioned above, there is still a lot of uncertainty around the housing market, which gives way for some positive trends for multifamily investors. Climbing housing prices, excessive demand, and economic uncertainty are the issues buyers are facing. Fewer options combined with competitive bidding among buyers is leaving many would-be homeowners in the position to lower their expectations or fallback to renting. Simply put, people may prefer to hold out for a buyer’s market when uncertainty fades, choosing to sign leases in the interim.
Tenants Will Prioritize Privacy and Personalization More than Ever
Pre-pandemic, millennial renters sought out community spaces for interaction. Now, more and more people have started seeking out privacy. Instead of demanding amenities, renters are looking for more indoor space, such as spacious kitchens and private entrances with outdoor access to and from apartments. The pandemic changed the ways in which people choose to spend their time, which now seems to be more secluded, as safety and risk tolerance surrounding the virus has people reassessing who they spend time with.
The Urban Exodus Will Continue, But Big Cities Will Never Die
The drastic shift of people who left big cities for rural housing is still in full force. Most people who left major cities make up the majority of remote workers, but the country's biggest cities will continue to thrive with the influx of new residents as cities begin to open up again. Young people will likely flock to the cities wherever affordable housing options arise. That being said, many renters living in top-tier cities like New York and Boston will seek suburban markets for better tax benefits and generally lower living costs.
Final Thoughts
The unique conditions of the current housing market combined with the lingering pandemic give way for some unusual trends for multifamily investors. It's a good idea for investors to keep an eye on ongoing changes in consumer behavior and recourses as well. Until the housing inventory stabilizes, it seems that renting with continue to remain in high demand, along with particular modified living requests from tenants, making multifamily properties a lucrative investment.
If you have any questions about the latest multifamily real estate investment trends, the experts at RCN Capital would be more than happy to have a conversation. Contact us today!