Laramar Group Projects Positive Property Fundamentals Through 2022 but Rising Interest Rates May Cause Capital Market Disruption

DENVER, CO - Record low vacancy rates and double digit rent growth continue to drive multifamily property-level fundamentals across the United States. According to a Mid-Year Multifamily Review by The Laramar Group, multifamily performance nationally is expected to remain resilient throughout 2022. However, rising interest rates during the second quarter have had an effect on capital markets resulting in lower loan-to-value ratios, increased borrowing costs, asset price discovery and an uneven transaction market.

Among the top multifamily trends noted by The Laramar Group, a leading national real estate investment and property management company, are:

• Investment volume will remain elevated but may decrease from recent record levels. Multifamily experienced a 56% year-over-year increase in sales in Q1 2022, reaching $63 billion. This was the strongest first quarter on record for overall multifamily activity, according to CBRE research. However, rising interest rates will have an impact on investment activity and pricing through the remainder of 2022.
• Construction will continue at a steady pace. Given population shifts and housing demand, Gateway and Texas markets are leading the way for new supply. Over the past four quarters New York, Houston, Dallas, Austin and Washington, DC accounted for 28.7% of the national annual total and nearly 30% of the activity in Q1 2022.
• Double digit rent growth will continue in select markets. During Q1 2022, the average rent rose by 2% quarter-over-quarter and 15.5% year-over-year, the fifth consecutive quarterly increase.
• Q1 2022 saw highest absorption in more than 20 years. New York topped the list for absorption in Q1 2022, with 105,600 units. Among the other top 15 markets noted by CBRE are high population growth markets such as Denver, which ranked 9th, and Orlando, which ranked 12th, as well as mature markets such as Chicago, which ranked 5th, and Washington, D.C. which ranked 6th.

Over the past 18 months, Laramar has closed on six multifamily acquisitions in high growth markets such as Orlando and Denver, and mature markets including Chicago and Washington, D.C.. Those acquisitions totaled 1,675 units and had a total capitalization of $490.7 million. They include City Gate, a 241-unit property, and Avery Park, a 296-unit property, both in the Denver market; Fusion Apartments, a 192-unit property, and Castilian Apartments, a 304-unit property, both in Orlando; Covey at Fox Valley, a 216-unit property in the Chicago market; and Crossings at Russett, a 426-unit property in the Washington, D.C. market.

“We are expecting continued upward trajectory for rents in the multifamily sector, especially in the Southeast and Mountain states where demand drivers such as job and population growth are strong,” said Bennett Neuman, Chief Investment Officer with Laramar. At the same time, the recent dislocation in the capital markets may present interesting acquisition opportunities on a selective basis.”

Founded in 1989, Laramar Group is a vertically integrated and distinguished national real estate investment and property management corporation with a multi-billion dollar portfolio. For over 30 years, Laramar has delivered an unparalleled level of service to the real estate industry. Laramar has a presence in over 20 markets from coast to coast and maintains corporate offices in Chicago and Denver.