The multifamily market is set for a healthy 2018. Although deal volume fell this year over the record-breaking 2015 and 2016, multifamily was still a highly sought-after investment market. Next year, Ella Shaw Neyland, president of Steadfast Apartment REIT III, expects multifamily to continue to be a strong investment class. While Neyland couldn't speak specifically about her business, she sat down with us for an exclusive interview to give us some expert insight into multifamily this year.
GlobeSt.com: Multifamily transaction volume fell in 2017. Do you think that trend will continue through 2018?
Ella Shaw Neyland: In general, 2017 we saw sales activity in the multifamily space drop off from where it has been the last two years. Having said that, 2016 was a record-breaking year and 2015 was a record-breaking year up to that time. So, you had a record in 2015 and it got even better in 2016. This year, as far as attractive investments, will it be the same level as it was in 2015 and 2016, probably not because you don't have the big chunky transactions. As far as the normal volume of transactions, I think it is still going to be very strong.
GlobeSt.com: Why do you expect the market to be strong this year? What are the drivers?
Neyland: There are three reasons why I think that. One is that the uncertainty with the tax reform, hopefully, goes away and people can make informed decisions. The second is that it will still continue to be a robust real estate market with sustainable, predictable product because of the demand and the fundamentals in the market. The third is to look at availability of capital, because that drives transaction volume. If you really believe that Fannie and Freddie are going to continue to be active in 2018, particularly with their mission to do green financing and housing for working America, availability of capital drives transactions.
GlobeSt.com: What is your outlook for the economy this year?
Neyland: I don't see any fall off the cliff event. I think that it will continue to work along the same range that we have been seeing, and I don't see any reason why it shouldn't. It is not as though everyone is going to decide that they aren't living in apartments this year so that the fundamentals go away. That will continue to be strong. And, Fannie and Freddie continue to be aggressive. Anytime two behemoths like that compete, it drives the cost of capital down. When capital costs go down, volume activity goes up.
GlobeSt.com: Multifamily has been called the “darling” of commercial real estate. Do you think the asset class will remain a market leader?
Neyland: It used to be that people didn't think that apartments were a commercial real estate investment because it isn't an office building or retail. People used to think of it as commodity real estate. Now, it's not. It is really a lifestyle now. It is an interesting and challenging business to be. I think as we move into this, you have to understand the industry. It isn't the old buy, rent and sell strategy. There is going to be a real distinguishing characteristic between active managers and owners of real estate and those that treat it as a buy and hold asset. That world has gone away, and not just for apartments but also in other sectors as well. It seems like it takes more effort to get a deal done today, but there are good deals being done.
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Kelsi Maree Borland
