Recently, as I was researching the development trends in the real estate markets of major countries around the world, I discovered that the pandemic has done little to dampen global investors' interest in multifamily properties. In fact, it has spurred a rapid growth in this industry, especially outside the United States, and is expected to continue, possibly making multifamily properties a leading global investment asset class.
CBRE's latest report sheds light on the outlook for the global real estate market this year, and I'd like to share some key insights.
During the economic downturn of 2020, the multifamily sector exhibited resilience, with a smaller decrease in investment volume compared to most other mainstream asset types. Its attractiveness for investment lies in its stable market performance, low vacancy rates, and high rental yields. Despite lockdown measures and the impact of remote work on many urban and central business district properties, investment in multifamily real estate remained strong in the first half of 2021, leading to rising prices in many regions.
As a result, I anticipate a decrease in vacancy rates over the next 12 months, with rental rates showing steady growth. Furthermore, as more employees return to the office, the economies of cities most heavily affected by the pandemic may experience a steady recovery. With a growing global interest in multifamily property investments, cap rates will further compress. Cap rate compression occurs in markets where investors anticipate continued price increases. The higher the price appreciation, the lower the cap rates, leading to cap rate compression.
For those unfamiliar with multifamily real estate, it refers to apartment rental communities that can be privately or publicly owned. They are typically managed by professionals and include shared facilities such as entire apartment buildings, fitness centers, and clubhouses.
The multifamily real estate industry is most mature in the United States and has been the largest investment asset class in the country for the past six years. While multifamily housing is on the rise in many other parts of the world, this market has been rapidly expanding.
Over the past five years, investment in Europe, the Middle East, Africa, and the Asia-Pacific region has all grown by 50%. The COVID-19 pandemic has done little to deter investors' interest in multifamily assets.
It is expected that the continued substantial growth in investment and development outside the United States will make multifamily properties one of the leading global investment asset classes in the near future.
CBRE's 2021 Global Investor Intentions Survey data also shows that investors in 2021 are more optimistic, with 60% of investors expecting to increase their acquisitions of commercial real estate.
I believe multifamily properties will be among the primary beneficiaries, as global investors rank this industry as the second-most preferred investment asset class for 2021, with it being the most favored property type for 25% of investors.
2023.09.12
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