The country’s multi-family market remains the king of stability as far as the commercial real estate industry is concerned.
But that doesn’t mean this will always be the case. As stable as the multi-family market has been, there are no guarantees that it, too, won’t eventually fall into a slump.
Brian Manion, vice president in the Chicago office of Wells Fargo Multifamily Capital, points to increasing rents. For a long time, rents in the multi-family sector were stable. Now, landlords are raising them.
If these rents soar too high, it could slow the boom times in multi-family.
“With rents going up, there does come a point when it’s going to make financial sense to start buying again instead of renting,” Manion said. “Until that time comes, the multi-family market will remain strong.”
Kevin Filter, president of financing company Oak Grove Capital in St. Paul, Minn., said that if interest rates rise, that could negatively impact the multi-family market. At the same time, if developers suddenly become too active and build too many multi-family projects across the country, that could lessen demand and leave landlords and owners once again boosting concessions and lowering asking rents in an effort to prevent high vacancies.
But for now, Filter is enjoying the strength of the multi-family market. Oak Grove services almost 1,300 loans, Filter said. And that’s a good, strong number.
“Year over year, quarter over quarter, our financials, our operations continue to improve,” he said. “It’s very positive right now.”
John Reed, senior vice president in the Omaha office of NorthMarq Capital, too, said that the multi-family market’s continuing strength is far from a blip. As he looks at the country’s economy, Reed says, he expects to see multi-family’s hot streak continue for a long time.
“In terms of demand from consumers, it has everything to do with the single-family housing market,” Reed said. “That is the fundamental that is driving everything. And that market doesn’t look to be getting better any time soon.”
