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Berkadia Survey Shows Multifamily Investor Confidence

A summer survey recently released by Berkadia shows high confidence in the market among multifamily investors. Echoing numbers seen in polls in early 2018, this latest poll of over 150 combined Berkadia mortgage bankers and investment sales brokers demonstrates a solid faith in the activity they’ll see for the remainder of the year, even despite rising interest rates and other economic variables.

BAM looked at the poll of industry investors and we share what’s driving the continued optimism in multifamily investing for the rest of the year. The Berkadia poll was revealed on their site recently and you can review their findings by clicking here.

Multifamily Activity

The survey questioned a total of 156 industry pros across a wide net of 60 offices to garner their impression on the multifamily investment direction for the second half of the year. At the start of the new year, investors were aware of the potential for several interest rate hikes; however, even after rate increases with others on the horizon, as well as possible regulatory and political uncertainty, investors still remain positive about the multifamily market’s activity.

A majority of Berkadia experts, at 70%, anticipate that by the end of the year deal volume will have remained steady or even increased. A slightly smaller percent of those surveyed, at 67%, expected multifamily transactions to remain consistent or increase by year’s end. Another majority (72%) of those polled believe that multifamily will be the most active sector for the rest of the year. Showing real optimism, an impressive 81% of investors surveyed said that they their outlook has remained the same as the beginning of the year or they are even more positive.

Interestingly, a similar majority (70%) did note that rising interest rates has either “somewhat or definitely” impacted investment sales and commercial real estate lending this year. Executive VP and Head of Production at Berkadia, Ernie Katai, is quoted as saying that although the rising interest rates were expected, they’ve still affected deals – most notably on the lending side. He goes on to add that the economy’s current health, with elements like a rising labor force and solid hiring have kept the “investment sales deal flow strong.”

Government-Sponsored Enterprises

Most of the Berkadia survey respondents (87%) anticipate Government-Sponsored Enterprises (GSEs) will provide a majority of the financing the rest of 2018. The Berkadia piece notes that despite the high confidence in GSE financing, investors should follow government and any potential policy or regulations that could impact GSE structure.

The Berkadia release quotes Katai again, saying that although there isn’t a current indication GSEs will be restructured, since the current administration has mentioned it, sectors like affordable-housing should pay attention to any possible government action. As far as investing goes, 86% of survey-takers said domestic capital would lead investments for the rest of the year; similarly, domestic private investors would account for 60% and domestic institutional investors would account for 26%. Berkadia noted that foreign investors have shown interest in markets like student housing.

Location & Demographics

Respondents weighed in on hot locations, with 81% saying they’re still positive about areas in the west, southeast, and southwest for lending and investing activity. VP Katai is quoted as noting the areas across the country seeing plenty of activity and investor interest: New York, Phoenix, Houston, Seattle, among others. Millennials were cited yet again as the demographic affecting change in the multifamily industry.

Berkadia noted the generation’s ongoing rental-over-ownership preferences and how it’s had a direct effect on lending and investment sales activity. Berkadia VP Katai references how much Millennials are shaping the industry, based on their metro location and interior space preferences. as well as their tech needs.

What is clear is that in the months since the previous industry poll, even with interest rate adjustments and potential regulation changes, multifamily investors are seeing continued activity in the industry and remain optimistic about the remainder of 2018 for multifamily investment.

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