Berkadia Forecast: Southeast to Garner Bulk of Multifamily Investment, Financing Activity in 2018

AMBLER, PA. — Mortgage bankers and investment sales brokers alike expect multifamily markets in the Southeast to record more investment and financing activity than any other region in 2018.

In Berkadia’s inaugural poll of nearly 150 staffers across 60 offices, the company reveals that more than one-third (36 percent) of its respondents predict the Southeast would see the most deals take place this year.

“Population influx, continued job growth and significant development stabilization will make the Southeast a destination for commercial real estate growth and investor appetite in the coming months,” says Ernie Katai, executive vice president and head of production at Ambler-based Berkadia.

Berkadia_US Employment Growth

For example, the Atlanta metro area is on track to add 2.5 million people over the next 25 years, the equivalent of adding the entire metro Charlotte population, according to the Atlanta Regional Commission. This type of population growth is attractive for employers looking for a new base of operations.

This week French car manufacturer Groupe PSA announced that it chose Atlanta for its North American headquarters, and media outlets are reporting that Facebook is interested in building a massive data center complex in the metro area.

Atlanta recently made the short list for Amazon’s second headquarters. Of the 20 potential host cities, six other metros in the Southeast and Mid-Atlantic made the first cut — Raleigh-Durham, Nashville, Miami, Suburban Maryland, Northern Virginia and Washington, D.C.

The winner of the Amazon HQ2 sweepstakes is expected to see an influx of 50,000 new tech jobs and $5 billion of investment from the Seattle-based behemoth, which would be a huge boon for the winner’s multifamily market.

Other corporate relocations and expansions in the region have also increased the prospects of the region’s overall multifamily market, as these jobs often attract young talent who are looking to rent versus own while living near their workplaces and surrounding intown amenities.

“Younger generations who are looking to take advantage of low cost of living and increased opportunity to build their careers are turning to the Southeast to serve these needs,” says Katai. “As this renter activity spikes, investment opportunities will follow and investors will seek financing in the growing region.”

Multifamily’s Momentum Continues
Berkadia respondents predict the growth of the multifamily sector continuing across the country, not just in the Southeast. Nearly three-quarters (74 percent) of mortgage bankers expect to see no downturn in the multifamily lending space this year, saying that deal volume will either increase or remain the same from 2017.

Expectations are high on the investment sales side as well, with 72 percent of brokers saying they expect the number of transactions to either increase or stay the same over the course of the year.

Additionally, 81 percent of both mortgage bankers and investment brokers anticipate deal value for both financing and sales to increase or stay the same in 2018. Katai says that the overall optimism within the Berkadia ranks is due to an improving economy and the newly passed Tax Cuts and Jobs Act of 2017, which was in the legislative process the time when the poll was conducted in the fourth quarter of last year.

Berkadia_US Construction Pipeline

“We anticipate the new tax law and employment growth will have the most impact on the market in the coming year,” says Katai. “These factors will be even more important than anticipated hikes on interest rates. Those increases have largely been telegraphed by the Fed, and so investors have forecasted this in their plans for the year.”

Bullish on Seniors Housing
Within the multifamily spectrum, Berkadia’s investment brokers are bullish on sales activity for seniors housing assets in 2018. Nearly four in 10 investment sales brokers (38 percent) indicate that seniors housing will see more activity this year than last. This expected boost is driven by the aging baby boomer population.

“As the American population continues to age, we’re seeing a heightened demand for independent and assisted living and skilled nursing facilities throughout the country,” says Katai.

Berkadia conducted the internal poll between Sept. 28 and Oct. 27, 2017. The survey was conducted online and was answered by 54 investment sales brokers and 89 mortgage bankers, totaling 143 overall respondents.

— John Nelson

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