Whenever I ask commercial real estate pros which commercial sector is performing the best these days, I always get the same answer, multi-family.
Why is that? According to Bruce Gerhart, Midwest regional director for national commercial mortgage-banking firm Love Funding, it’s largely because developers in the Midwest have mostly ignored multi-family for the last eight to 10 years.
“Multi-family really has been under-served, when it comes to new buildings, by comparison with single-family building in the Midwest,” said Gerhart, who works out of Love Funding’s Cleveland office. “Now, with more people, because of the problems in single-family, having to rent instead of own, the pressure is back on multi-family. These properties are filling up now.”
This means that, gradually, landlords are starting to raise their rents.
The key to keeping this trend alive is for developers to refrain from overbuilding in the multi-family market. The good news for landlords is, as Gerhart says, that there is so little funding available. There simply isn’t enough financing out there to give developers the chance to overbuild in multi-family even if they wanted to.
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