Gray Report Newsletter: February 1, 2024

Are We Underestimating Apartment Demand?

The enormous amount of apartment supply expected this year should temper any expectations of apartment demand, but newly-published research on the topic argues that U.S. housing needs are far larger than can be addressed even with the historic amount of multifamily completions last year and forecasted for this year. On the capital markets side, recent data points to a substantial increase in CRE investment interest, but given the Federal Reserve’s recently-announced intentions to keep interest rates at their current levels past March of this year, the market may not thaw until later in the summer when financing conditions improve.

Multifamily, the Nation, and the Economy

Harvard Rental Housing Report: Demand Rising, and More Investment Needed

Via Harvard Joint Center for Housing Studies: The fall-off in apartment construction is just one of the continued pressures on rental housing affordability, and “the underlying age distribution of the US population also points to sustained rental demand going forward,” highlighting the continued need for additional apartment supply.

Multifamily and the Housing Market

2024 U.S. Multifamily Investment Forecast

Marcus & Millichap: “Investors who came of age since the GFC have framed their strategies within the context of a 2.5 percent mean 10-year Treasury rate and rent growth ranging above 5 percent. Comparatively, investors active in the 90s and early 2000s operated with an average 5.5 percent 10-year Treasury and rent gains near 3.5 percent, which align closer to the anticipated investment climate going forward.”

Multifamily Markets and Reports

National Rent Report: January 2024

Apartment List: “January’s dip was relatively modest compared to the declines we’ve been seeing in recent months, indicating that we’re approaching the end of the market’s slow season.”

Commercial Real Estate and the Macro Economy

2024 U.S. Investor Intentions Survey: Are CRE Markets Ready to Thaw?

Via CBRE: In 2024, the results of the investor intentions survey are a near-perfect inverse of 2023. Whether this will result in more buying and selling remains to be seen, but last year’s intentions to buy/sell less were fairly accurate.

Other Real Estate News and Reports

Report: U.S. Office Fundamentals Remain Weak at Close of 2023

Via Colliers: This report closes out year in which “the vacancy rate climbed 120 basis points, to 16.9%, easily surpassing the prior peak of 16.3% at the height of the Global Financial Crisis (GFC).”

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