Small Multifamily Investment Trends Report (Q1 2025)
Just dove into the latest Small Multifamily Investment Trends Report (Q1 2025) from our friends at Arbor, and the findings are too good not to share! 🤓📈
For all my fellow real estate investors and professionals, here’s the inside scoop on what’s happening in the small apartment market:
✨ Key Findings ✨
Valuations are Bouncing Back! 📈 After a dip, small multifamily asset valuations are on the upswing, growing modestly in the last two quarters of 2024.
Lending is on the Rise! 💰 Despite interest rate headwinds, origination volumes ticked up by 5.0% last year, hitting $46.7 billion in 2024.
Workforce Housing is Still King! 👑 The ongoing structural need for workforce housing continues to be a major pillar of support for the sector's demand.
📊 By the Numbers 📊
Occupancy Rates are Solid! ✅ Occupancy rates for small multifamily properties averaged a very healthy 97.5% in Q4 2024.
Cap Rates are Holding Steady! ⚖️ Small multifamily cap rates averaged 6.0% in Q4 2024, showing stability even with market volatility. For comparison, the average for all multifamily properties was 5.6%.
Refinancing Activity is Strong! 🔄 The refinancing share of lending finished Q4 2024 at 68.4%.
Leverage Update! 📉 Loan-to-value (LTV) ratios retreated to 60.2% in Q4 2024 as lending criteria tightened.
Debt Yields Climbed! 🧗 Average debt yields hit 10.0% in Q4 2024, a level not seen in over a decade!
🔮 Outlook & Strategy 🔮
The small multifamily sector demonstrated impressive resilience in 2024, with improvements across property incomes, valuations, and occupancy rates. While the dream of rapid interest rate cuts may have been optimistic , the sector's stability should help it power through short-term headwinds. The key takeaway? Investors should be prepared for a "higher-for-longer" interest rate environment.
The data speaks for itself! The small multifamily market remains a dynamic and promising space for savvy investors.
https://arbor.com/research/reports/small-multifamily-investment-report-q1-2025/?acc=y
