— By Benjamin Galles, senior vice president, CBRE —
The outlook for the Reno multifamily market in 2024 is similar to how the year panned out in 2023. There is significant interest in Reno from investors across asset types, earning us a ranking on Business Insider’s list of the top 15 hottest real estate markets for the next decade.
Northern Nevada’s continued job growth has piqued investors’ interest in owning multifamily properties within the state. This growth will continue as existing companies expand their presence in the market, proving their commitment to the city and people of Northern Nevada.
The current elevated construction costs and construction loan costs could pose a roadblock to developers meeting the anticipated demand in the next 12 to 24 months. That being said, there are currently 4,700 apartment units under construction in the market. This will likely be absorbed by people moving into Reno from outside the region.
Unlike other markets we’ve seen across the country, very few loans in our region have maturities over the next 12 months. This means seller motivation in Reno remains low to moderate when it comes to offloading properties. The lack of debt events where owners will be pressed into a sell or refinance circumstance should prevent the values of these assets from significantly declining. This is one reason why Reno is favored as a multifamily market.
Since September 2023, around 26 percent of all multifamily sales have included bank financing — and nearly all of them were loans with 50 percent loan to value or less. The remaining transactions have been completed with owner financing or were all-cash transactions.
Current market cap rates in the past 12 months have ranged from 5.25 percent to 5.75 percent. We have started to see cap rates get close to the 6 percent range as market interest rates hover over 6 percent, while buyer appetite to acquire multifamily assets at negative leverage is low.
As demand for places to live in Reno increases, the demand for multifamily properties across the region will be steady.