Berkadia Poll: Why Multifamily Thrives Despite Rising Rates
There is a willingness on the part of the investor to accept less returns because the asset class is so steady.
NEW YORK CITY–Mortgage banking and investment sales experts at Berkadia remain bullish on the multifamily sector — despite the impact rising rates have had on deals so far this year. Indeed, the survey respondents say, they are even more enthusiastic about the asset class than they were at the beginning of the year.
The reason, simply put, are the robust economic fundamentals, which — as of right now — outweigh any erosion in returns that rising rates are causing, Ernie Katai, executive vice president and head of Production at Berkadia, tells GlobeSt.com. “There is a willingness on the part of the investor to accept less returns because fundamentals are so good.”
The highly competitive cap rates for multifamily are proof of that, he adds. Normally cap rates increase as rates rise. “But cap rates are holding steady, which means someone is taking less of a return.” The only reason an investor would be willing to do that, Katai says, is because multifamily is viewed as a safe investment.
By the Numbers
Here is how Berkadia’s respondents break down on the subject: 72% say that multifamily will be the most active sector for the remainder of the year, and 81% of respondents say that their outlook now is either more positive or the same compared to what it was at the beginning of the year. This confidence remains, despite most respondents (70%) saying that rising interest rates have somewhat or definitely impacted commercial real estate lending and investment sales activity this year.
The proprietary poll, which the firm calls its Mid-Year Powerhouse Poll, was conducted in July and surveyed 150 Berkadia investment sales brokers and mortgage bankers across 60 offices to assess opportunities in the multifamily space for the second half of the year.