Uncertain Occupancy May Affect Multifamily Finance

WASHINGTON, DC-The continued availability of capital for multifamily development and investment sales has been a relative bright spot in the industry since the capital crunch began. Fannie Mae’s and Freddie Mac’s continued support have been one reason; the sector’s strong fundamentals have been another. Few in the industry are projecting a sharp reversal of either factors. That said, however, an uncertain outlook in occupancy rates in some markets is becoming cause for concern.

“The apartment market is very interesting now,” Colin Whittier, VP of KeyBank Real Estate Capital tells GlobeSt.com. “A lot of lenders are very busy doing agency deals and these are still going strong. But when you look at more recent data you see that some of it is a little scary.”

Namely, he says, there is a danger that oversupply could erode projected cash flow in some deals if vacancies start to rise and rents fall. “Builders are still developing (multifamily projects) as quickly as they can,” Whittier says. Transparency into vacancy rates may not be as clear as some expect either, he adds, as the shadow market becomes more active in the downturn.