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Q3 2016 U.S. Multifamily MarketView
December 19, 2016
While the U.S. multifamily market remains healthy with high levels of demand, market fundamentals moderated in Q3 2016 as new supply outpaced net absorption.
Although fundamentals are expected to soften more in 2017, the market will remain attractive for current owners and investors given sustained strong demand and a slowdown in new construction activity by 2018.
Healthy demand was reflected in the 192,000 units absorbed in the year ending Q3 2016, a level that is comparable to the prior year.
Delivery of 59,000 new apartment units in Q3 brought the trailing four-quarter total to 233,000 units—up by 24.1% from a year ago.
Vacancy averaged 4.5% in Q3, representing a modest 20-basis-point increase from a year ago.
Multifamily rents continued to rise; the rate of growth subsided to 2% for the year ending Q3 2016—the lowest level since early 2010.
Acquisitions activity remains robust despite moderate cooling in market fundamentals and a more tempered 2017 outlook. Investment reached $37 billion in Q3, up 7.6% from the prior year. Debt capital remains widely available, and year-to-date mortgage volumes climbed 8.5% year-over-year.
Multifamily asset values rose 10% year-to-date through Q3 2016 based on the RCA/Moody’s Commercial Property Price Index, double the increase for all real estate.
The NCREIF Property Index reflected a drop in total return to 8.5% for the year ending Q3 2016, well under returns in recent years. The garden apartment sub-index, however, is stronger at 11.1%.
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Last Modified: Monday, December 19, 2016
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