W&D Thinks Apartment Deals Will Start Up Again in H2

It is hardly a secret that transactions in all CRE assets have dropped significantly due to interest rate hikes, inflation hitting a 40-year high of 9.1% in June before slowing to 6.4% this past January and the threat of a recession. 

This includes multifamily, the erstwhile darling asset class within the CRE community.

But Kris Mikkelsen, EVP of Investment Sales at Walker & Dunlop, is banking on apartment transaction activity to restart and grow in the second half. “The last time the market went through a significant repricing, it took approximately six quarters for transaction activity to get back to what most market participants would consider a historical pace of deal flow,” he said in the company’s new report on the asset class.

Part of the problem has been a decrease in available inventory for sale through January of this year, comparable to 2020’s second quarter when COVID-19 made its initial wallop. As a result, buyers are finding increased competition as assets moved to a bidding process in the first quarter of this year.

How long the scarcity remains is unknown as is the impact on values. Yet, Walker & Dunlop sees few signs of distress and forced selling.

Of the deals that are getting done, private capital has been an active player, at least according to W&D transaction data.

It accounted for 70% of the 64 Walker & Dunlop transactions awarded from the beginning of the fourth quarter 2022 through February of this year, with the remaining number from institutional capital. The latter group was limited almost exclusively to closed-end funds and separately managed accounts in the form of large state pension plans and some European and Asian capital sources.