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US multifamily acquisitions rose by 4.4% last year to $184 billion—the highest volume since Real Capital Analytics began tracking the market in 2005, according to a report by CBRE.
Overall investment was largely driven by single-asset purchases—the best indicator for investment momentum, CBRE says—that reached $145 billion last year, up by 10.3% from 2018.
Portfolio investment activity, which is more volatile, offset some of those gains, inching up by only 0.4% from 2018. In addition, 1031 buyers, large institutional investors and emerging capital all drove pricing in 2019.
Investment increased year-over-year in 23 of the largest 30 markets by volume. Boston had the largest increase (73.4%), followed by Seattle (65.5%), Las Vegas (63.4%), Baltimore (47.6%) and Charlotte (30.8%). New York City had the largest decline in 2019 (-35.2%), followed by Chicago (-26.5%) and Houston (-17.1%).
Historically low cap rates dropped even lower for the year, according to preliminary U.S. data from the H2 2019 CBRE U.S. Cap Rate Survey, which found that cap rates for infill properties averaged 5.11%, tightening by a modest 9 basis points (bps) from H1 2019. Suburban cap rates ticked down by 11 bps to 5.37%.
These trends should continue this year, according to Richard Barkham, CBRE's global chief economist & head of Americas research. "We expect sustained enthusiasm and capital for multifamily investment through 2020, along with deep pools of debt capital to finance buying activity," he says in prepared remarks. "This landscape should help bring reluctant sellers to the market and keep investment activity at very high levels."
Among his predictions for the year: Multifamily cap rates should be broadly stable, with slight compression possible. Also, investors should not count on significant appreciation returns, but income returns will remain steady.
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Erika Morphy
Erika Morphy has been writing about commercial real estate at GlobeSt.com for more than ten years, covering the capital markets, the Mid-Atlantic region and national topics. She's a nerd so favorite examples of the former include accounting standards, Basel III and what Congress is brewing.
