The question that we get from our investors often (and rightly so) is: “how did Multifamily, as an asset class, perform during the last recession in terms of the rent growth”?

The short answer: it outperformed.

More detailed answer:


According to research recently published by CBRE, during the last recession of 2008-2009, Multifamily experienced negative rent growth for only five quarters, with cumulative rent decline during that period of 7.9%. Not bad! For comparison, rents in Industrial, Office and Retail sectors declined 17.5%m 17.7% and 14.1%, respectively, from trough to peak; with negative growth continuing for 13 months for Industrial, 9 months for Office and 21 months for Retail (see the chart below).

As such, Multifamily sector is much more resilient than other types of commercial real estate and most properties in decent locations remained cash flow positive during the last recession which resulted in very low default rates on Multifamily loans (as was discussed in our previous piece).

 

In summary, we, as investors, should not be panicked by the prospect of upcoming recession. As long as we remain conservative in our underwriting, avoid short term debt and have sufficient cash reserves to last through a potential downturn, we should manage through the recession just fine. Yes, we will probably see some deteriorating occupancy and rent growth metrics but the duration of such period tends to be less than two years and most properties in the “good” markets (= population growth, job growth and job diversity with no industry representing more than 20% of the employment pool) should continue to generate cash even during the recession.

*This article is based on publicly available sources and is intended for informational purposes only. We do not claim ownership of the content used and encourage readers to refer to the original materials from their respective authors.

 

Interested in multifamily real estate investing? Our experienced team is here to help. From market research to identifying the best opportunities, we guide you through the process. Follow us on Instagram for exclusive content. Explore our comprehensive Udemy course for detailed insights and strategies. Ready to elevate your investment journey? Contact us now to schedule a consultation and achieve your financial goals in real estate.

 

* Disclaimer: The content provided on this website is intended for educational and informational purposes only and does not constitute investment, financial, or tax advice. We strongly recommend that you consult with qualified professionals before making any financial decisions. Past performance of investments is not indicative of future results. The information presented here is not a solicitation or offer to buy or sell any securities or investments. Our firm may have conflicts of interest, and we do not guarantee the accuracy or timeliness of the content provided. Investing involves risks, and you should carefully consider your financial situation and consult with a financial advisor.

Macro Economy, Multifamily

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