United States Multifamily Capital Markets Report

4Q 2021

Newmark presents the Fourth Quarter 2021 United States Multifamily Capital Markets Report.

Key Takeaways

• Multifamily investment sales volume reached an unprecedented $148.9 billion in the fourth quarter of 2021. Annual sales volume rose to a record high of $335.3 billion, an increase of 128.2% year-over-year. Investment as a percentage of the overall US commercial real estate market rose to 41.5% in 2021, the highest allocation to multifamily on record.
• Rent growth was historically strong in 2021 as landlords were able to raise rents well above pre-pandemic levels. Annualized effective rent growth averaged 6.8% for the year, with outperformance coming in Sunbelt markets. Landlords continued to take advantage of the ability to raise rents through new lease trade-outs, which averaged 16.0% nationally in the fourth quarter of 2021.
• Dry powder rose to $249.2 billion in 2021, a record level of capital set aside to be deployed into commercial real estate. Of the dry powder raised specifically targeting residential real estate, opportunistic and value-add strategies represent 73.4% of all capital raised.
• Fueled by pent-up demand, annual total returns increased to 19.9% in 2021, the highest rate since 2005 and more than double the long-term average of 8.6%. Total returns were highest in markets that experienced strong appreciation growth such as Las Vegas, Phoenix and Raleigh-Durham.
• Absorption surged to 673,478 units in 2021, far outpacing the new supply of 358,734 units. Markets throughout Texas and Florida garnered the highest levels of new supply over the past 12 months, led by Dallas. Strong demand over the trailing 12 months in Los Angeles, New York and Washington, D.C. is an encouraging sign of momentum in large, supply-constrained markets.
• Multifamily mortgage debt outstanding rose to $1.8 trillion, a 1.5% increase quarter-over-quarter. While the GSE’s debt outstanding rose slightly over the past quarter, banks, life companies and debt funds all increased lending capacity in 2021. With $832.5 billion in multifamily mortgage maturities estimated over the next five years, the investment sales and financing markets are likely to remain robust.