Multifamily W Minnesota

A booming multifamily market? It's worth trillions to the U.S. economy

A booming multifamily market? It's worth trillions to the U.S. economy,ph01

A strong multifamily sector is good for landlords, owners and the CRE pros who broker apartment deals. But it’s also a positive for the country. How much so? The apartment industry pumps more than $3 trillion into the U.S. economy each year.

According to a Hoyt Advisory Services Study, commissioned by the National Apartment Association and National Multifamily Housing Council, the apartment industry and renters each year contribute more than $3.4 trillion to the national economy.

That comes out to $9.3 billion each day. According to the study, renters contribute $3 trillion to the U.S. economy each year. Operations adds $175 billion a year, while new construction contributes $150 billion and repair $69 billion each year.

That’s impressive. And don’t expect those numbers to slow anytime soon. The apartment market, both across the country and the Midwest, remains strong, and demand for apartment living isn’t dipping.

Just ask multifamily finance professionals. They are continuing to see the pace of financing requests rise for this sector. Brett Olson, vice president of Minneapolis-based Grandbridge Real Estate Capital, said that the pace of multifamily originations has been strong since the end of the Great Recession. That’s a run of more than seven years.

What has made this sector so appealing? Olson said that investors were looking to diversify their investments following the recession. Multifamily was appealing because of the diversified rent roll that it brings.

“Investors didn’t have to rely on just one, two or three different tenants,” Olson said. “They could rely instead on a large rent roll. That’s why so many went to multifamily.”

Olson points to renters by choice – those renters who rent in apartment buildings because they want to, not because they have to – as the key to the multifamily sector’s long run of prosperity.

“Whether it’s been empty nesters moving into rental communities, recent graduates or young professionals, more people are choosing to rent because they like that lifestyle,” Olson said. “Instead of buying homes, they are choosing to rent. In the past, these people would have bought a home.”

Olson said that Grandbridge looks closely at the properties involved in finance requests, focusing on the demand that these apartments might have.

“What is driving residents to want to live here?” he asked. “Maybe it’s an urban setting. In that case, how walkable is it? If it’s a suburban location, how close is it to employers? Those are very important questions for us as we are looking at assets.”

And when it comes to the sponsors behind multifamily financing requests? Olson said that Grandbridge prefers to work with sponsors who are experienced in the multifamily sector and who have had success in it.

You can expect Olson and other commercial finance professionals to see more financing requests in the near future. The Hoyt Advisory Services study found that developers added 346,900 new apartments to the U.S. supply in 2017. That is a new high. For comparison? Back in 2011, developers only added 129,900 new apartments.