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Multifamily Top Pick in '07

Apartments are once again the number one sector in which to invest for return potential, according to PricewaterhouseCoopers LLP and the Urban Land Institute. In their Emerging Trends in Real Estate 2007 report, unveiled at ULI's fall meeting last month, the firms note that bullish trends for the sector are allowing owners of multifamily product to increase rents along with occupancies. For buyers, cap rates will begin to rise slightly, since condo converters will no longer push prices up and eventually compress cap rates to unsustainable levels.

By Sule Aygoren Carranza | Updated on November 14, 2006

Sule Aygoren Carranza is managing editor of Real Estate Forum and editor of Multi Housing forum, from which this article is excerpted.

Denver—Apartments are again the number one sector to invest in for return potential, according to PricewaterhouseCoopers LLP and the Urban Land Institute. In their Emerging Trends in Real Estate 2007 report, unveiled at ULI’s fall meeting here last month, the firms note that expensive housing prices and rising mortgage interest rates are pushing more people into the rental market, which is also experiencing heightened demand from young adults. Moreover, job growth is making it less likely that people will share units or live with parents.

All of these bullish trends are allowing owners of multifamily product to increase rents along with occupancies. Further, homeowners with adjustable-rate mortgages may default on their payments and return to the rental pool. For buyers, cap rates will begin to rise slightly, since condo converters will no longer push prices up and eventually compress cap rates to unsustainable levels.

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