Although investment activity has been relatively slow in the multi-family real estate sector, many investors continue to prefer the asset class because of its liquid ability. In fact, surveys have shown that multi-family properties account for a third of all transactions this year.
While it's true that the supply of new units has increased by several thousand, there is a net increase in yearend occupancy rates and annual rent growth, which is only the growing preference in the multi-family real estate sector.
It is worth noting that the average cap rate in the multi-family real estate sector is the lowest among commercial real estate properties, making it an attractive prospect for investors amidst stricter lending conditions.
Tightening Lending Conditions
Investors are facing more challenges than ever before when it comes to accessing capital due to increasingly difficult lending conditions. Their main source of financing seems to be government-sponsored enterprises; however, these entities also make it difficult for investors to qualify for their loans.
Despite the ever-increasing cost of capital in the past 12 months, the availability of capital itself is strong compared to the previous cycles. This is an important factor when factoring in the short-term floating rate debt for the coming years.
Banks have been more cautious about lending capital since the fall of Silicon Valley Bank and seem to only have offers for very few clients and conservative properties.
The void left behind by banking institutions, it seems, is being filled up by life insurance companies that are active across multi-family sectors and apartments.
However, despite the tightening lending conditions, the bulk of investment activity is being carried out by private investors. Many traditional institutions, on the other hand, seem to be more cautious about lending capital. Furthermore, there is an increased presence of Asia-Pacific investors in the real estate market because of its stability.
Multi-Family Apartment Buildings In NYC
Now that investors are facing increasingly tough odds of securing capital, it has become more important to seek relationships with a wider network of lenders. These sources include life insurance businesses, banks, CMBS, GSEs, and others so that investors may have access to viable financing solutions.
This would allow clients to secure investments in commercial real estate and apartment buildings. Given the current market conditions, it appears that the commercial real estate industry may struggle to grow. However, interest in the commercial real estate sector isn’t dying down. The only real challenge in the sector is access to finance due to tightening lending conditions. Contact Milbrook Properties Ltd. today on information of our multi-family apartment buildings in New York.