Is Multifamily Still the Darling?

LOS ANGELES—Is multifamily still the commercial real estate darling? At this point in the cycle, it is a question on everyone's mind—and one that multifamily power players will tackle today and tomorrow at RealShare Apartments in Downtown Los Angeles. The two-day event will look at the national multifamily market from every angle, uncovering where the opportunity lies and how multifamily is trending against other asset classes.

These are exactly the issues that John Sebree, VP and national director of the national multifamily housing group at Marcus & Millichap, will address on the Industry Leaders: The Way Forward panel tomorrow. “Right now we don't have pent up demand, but we are continuing to more forward at a strong rate,” he tells GlobeSt.com. “Everything has been picked over and there is no hidden area that still has huge returns.” However, that doesn't mean that multifamily isn't still booming. Jim Andersen, SVP at Trammell Crow, who is speaking on the New Downtown: Thinking Beyond Multifamily panel, says that, while office and industrial classes have picked up, multifamily is still the preferred asset class with a lower risk profile.

Sebree adds that multifamily returns were better out of the recession than it in the previous market peak, and that is because multifamily was not overbuilt going into the recession. “In 2005-2007, the multifamily market was doing okay, but we weren't experiencing the stellar returns that we are today,” he says. He also notes that single-family housing is still lagging in this market, which is different from previous recessions. In the past four recessions, the single-family home market contributed 4.7% to the GDP, and that number increased by a couple of percentage points during the recovery. In this cycle, however, the single-family home market only accounted for 2.4% of the GDP, and even now, it is at about 3%.

As a result, demand for rental housing is at all-time highs. As Andersen points out, Mayor Eric Garcetti called for 100,000 new multifamily units to be developed in Los Angeles by 2021. In all, it looks like multifamily may have some runway left. Listen to all of the experts weigh in at RealShare Apartments today, October 21, and October 22 in Downtown Los Angeles.