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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