Secondary markets, workforce housing and ground-up construction will be the mantras of multifamily capital this year. The multifamily market is getting more heated, with cap rates hitting record lows and competition growing fierce. As investors look for yield, they are starting to head into new multifamily niches, looking for deals in secondary markets and workforce housing-quality assets. Construction lending may also be rebounding this year after taking a pause in 2018.

“As people try to chase yields, they are focusing on different aspects of multifamily,” Shlomi Ronen, managing director of Dekel Capital, tells GlobeSt.com. “Some investors are going into secondary markets and buying B and C product and calling it workforce housing. We are seeing more people focus on that than better-located or newer assets. People are trying to stay within the space, and they are trying find different avenues to capitalize their deals.”

With an incredible demand for middle-market housing, workforce product and affordable product may be hitting investment radar this year—even if there are few lending programs to support affordable deals outside of the agencies. Ronen says that there is an increasing demand for the affordable product type in the investment community. “I think there seems to be more of a focus on affordable product than in previous years,” Ronen explains. “We are starting to hear more about it and people are trying to gravitate toward that type of business plan.”