Treasury Decline Unlocks New Multifamily Opportunities

The multifamily real estate market is showing signs of renewed vigor, with transaction volumes starting to increase after a period of slowdown. Most notably, the 50 basis point decrease in the ten-year Treasury in the last week has opened up new financing opportunities for multifamily deals and is expected to catalyze even more transactions in the coming months. Matt Mitchell, senior managing director of Berkadia, highlights the immediate impact of this change, noting that on an $80 million loan, their mortgage bankers were able to secure an additional $10 million in loan proceeds within the last month, increasing the loan-to-value ratio from 55% to 65%.

However, even before this significant drop in Treasury yields, buyer engagement had been on the rise. Mitchell tells of a recent multifamily deal in Tampa that received 39 offers, including bids from several well-known institutional investors. “This level of interest would have been unheard of just six months ago,” he says, and he believes it signals a marked shift in market sentiment.

Several factors have contributed to this increased buyer engagement. Earlier in the year, major institutional players like Blackstone, Brookfield, and KKR made substantial investments in the multifamily sector, which served as a signal for other institutional groups to re-enter the market. Additionally, there’s a growing anticipation of declining interest rates, further fueling investor interest.

Improved insurance rates are also playing a role, particularly in Florida, where Mitchell is located. Recent renewals have seen a 25% drop in premiums, which, while not returning rates to pre-spike levels, represents a significant boost to net operating income (NOI) for property owners.

Looking ahead, the market is anticipating meaningful rent growth. As supply bottlenecks ease and new inventory remains low, occupancy rates are expected to increase, paving the way for rent growth to regain momentum. Some clients are already reporting limited but positive rent growth, which can have a substantial impact on deal underwriting.

These factors combined have led to a narrowing of the bid-ask spread, with more sellers willing to enter the market as pricing improves. Some property owners are also facing decisions regarding financing, such as extending construction loans or purchasing new rate caps, which may motivate them to sell.

The increase in deal activity is evident in the numbers. In the Tampa market, for instance, multifamily transaction volume jumped from just $50 million in the first quarter to nearly $1 billion by the end of the first half of the year. While still below the market’s typical $4 billion annual pace, this represents a significant uptick in activity.

Institutional capital is also returning to the market, another factor contributing to a more robust transaction market, says Scott Wadler, managing director at Berkadia, who adds that investors are optimistic about stabilizing cash flows and improving rents. “Some buyers are even pursuing deals at neutral or negative leverage, planning to stabilize assets and refinance in 12-18 months when rates are expected to be lower,” he says.

With substantial liquidity on the sidelines and investors seeking higher returns than those offered by Treasuries, the multifamily market appears poised for increased transaction activity in the coming months.