The past decade has seen a constant demand for multifamily housing. Department of Housing and Urban Development shows there are nearly 32.6 million residential units. Out of that number, approximately 24.6% are multifamily units. As CBRE anticipates that the economy will rebound as the pandemic seems to be over. Commercial real estate sees new multifamily industry trends in 2022.
To achieve this goal, developers must reconsider their idea of apartment lifestyle according to the latest multifamily market trends. In this topic, we’ll be discussing the multifamily industry trends in 2022 that investors should look into before investing.
1. Substantial increase in rent
As mortgage rates are predicted to rise in 2022, consumers will prefer renting to buying single-family homes. With rents growing up at a double-digit pace means there is substantial demand for multifamily units. Metro cities like Florida, Orlando, Tampa, Los Angeles have seen rent growth of over 20% year over year. Although the figures are lower than pre-pandemic, research indicates a rise in multifamily construction in 2022.
According to NAR, approximately 650,000 apartment units are under construction, while net absorption is 750,000. As a result, the vacancy rate will be tight causing rental rates to grow up to 10% in metropolitan areas.
2. Strong Investment Opportunity
According to YEILDPRO, in 2022 the economy will supposedly return to normalcy with a growing GDP of 4.6%. They also predicted that the recent inflation spike will subside by the mid of 2022. The Federal Reserve has kept the interest rates at their lowest and is expected to remain that way.
It is expected that in the future the Federal Reserve might phase out its asset purchases due to inflation. As a result, it will raise the interest rates by almost 75 basis points.
Still, that is considered to be relatively low when compared to previous records. CBRE believes that the previous year’s multifamily investment volume will increase by 10% to $234 billion this year.
The NOI is anticipated to increase by 8%, and cap rates are expected to remain stable throughout the year. Overall investing in multifamily properties is a good investment choice.
Read Lilypads’ article on Net operating income (NOI) in commercial real estate here.
3. Health and wellness shape multifamily industry trends in 2022
After COVID-19, tenants’ topmost priority while looking for residential properties is spaces that promote healthy living. According to Mckinsey’s research, 79% out of 7500 people believes in wellness.
Some of the latest multifamily housing trends include amenities like developed spacious pools, gyms, yoga rooms. These are convenient choices that help in staying fit while maintaining social distance.
Owners can emphasize their commitment to healthy living incorporating LEED, WELL, and FIT-certified low-VOC products in their properties. Developers have reported that residents prefer such amenities incorporated in inside rooms rather than big outdoor spaces. Hence, this lowers the square footage resulting in more affordable housing.
Common areas like entry and exit points, laundry rooms, elevators are used on a regular basis. These must be provided with home automation technology in order to limit physical contact.
4. Suitable workspace at home
As the pandemic nears to end, employees are gradually returning to their offices. A study by National Housing Council shows that 45% of employees prefer working from home at least once a week.
Thus the need to accommodate an appropriate workspace environment is a must for developers and owners. Amenities like high-speed wifi and playgrounds for kids on-site can be beneficial to the parents when maintaining a work-life balance.
5. Multifamily industry trends in 2022 demand smarter apartments
If the pandemic had any positive influence then it would be the impressive advancement of technology in the industry. Work from home and flexible living had a huge role to play in the development of innovative technology. For more comfortable living, property managers must provide their residents with new technologies.
Proptech tools like smart thermostats, wireless sensors, smart water management systems ensure a convenient lifestyle. Installing these provides safety for your assets by reducing damage risk and high maintenance costs.
In addition to meeting the needs of WFH employees, Proptech also caters to the needs of aged and retired people. Technologies like Alexa, smart locks, smart lighting, etc. help provide safety and an easy lifestyle. This gives a feeling of enhanced living which boomers would not get in other expensive care homes.
Studies show that the implications of such technologies help to build up a smart community. This leads to rent hikes and a desire to renew their term among more than 50% of the tenants.
6. Pet-friendly environment
According to American Pet Products Association, 70% of US families have a pet. Therefore providing suitable accommodations like dog parks, dog walking areas can be a lucrative deal for pet owners. A study by FIREPAW, Inc shows that the US has currently a shortage of pet-friendly rentals. Therefore tenants having pets prefer to lease for the long term. As a result, including pet-friendly accommodations can lead to increased rent payments or charge a pet deposit to increase profitability.
The Lilypads Bottomline: Commercial real estate investors must dwell on the multifamily industry trends in 2022 to maximize profits
If the predictions about multifamily industry trends are accurate. Then it is something investors should look forward to in the year ahead. With favorable interest rates and a stabilizing economy, multifamily markets will be in high demand for both investors and renters. Lilypads’ well-qualified team can guide you to study these multifamily industry trends and turn lucrative opportunities into profitable investments.