DALLAS—The U.S. multifamily sector saw strong momentum at the start of 2022, with record leasing activity, rent growth and investment during the first quarter, according to CBRE’s latest report.
Investment in the multifamily sector increased by 56 per cent year-over-year to $63 billion in Q1 2022, the strongest first quarter on record and bringing the trailing four-quarter total to $374 billion, stated a release. Multifamily accounted for 37 per cent of total commercial real estate investment volume in Q1 2022, followed by office at 21 per cent and industrial at 20 per cent.
The multifamily market set a record four-quarter absorption total of 695,100 units in Q1 2022, up 12 per cent from the previous quarter and 77 per cent higher than the previous annual record of 393,000 units in 2000. Net absorption of 96,500 units was the highest Q1 2022 total since 2000.
The overall multifamily vacancy rate fell by 20 basis points quarter-over-quarter and 2.5 percentage points year-over-year to a record-low 2.3 per cent. Average net effective rent increased by 15.5 per cent year-over-year to $2,007 per month. Average rents now exceed their pre-pandemic levels in all but two of the 69 markets tracked by CBRE, San Francisco and San Jose.
Dallas/Ft. Worth was the leading metro for multifamily investment over the past four quarters with $29.2 billion in total volume, double the amount from a year ago and accounting for 7.8 per cent of the U.S. total. Atlanta had the second highest total of $21.4 billion, up by 150.1 per cent from Q1 2021, followed by New York with $17.7 billion.
“Strong multifamily fundamentals persist, with favourable migration trends, high household formation, and strong wage and job growth contributing to continued demand. An abundance of equity and debt capital remains available, albeit at significantly higher rates than enjoyed in the past few years,” said Brian McAuliffe, president of Multifamily Capital Markets for CBRE.
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