Current demand trends in 2020 and healthy underwriting standards indicate there shouldn’t be significant issues.
The upward cycle that has occurred since the economic correction in late 2008 has shown that multifamily assets have performed well across all stages. At various points over the last decade, the other commercial real estate classes haven’t all fared as well as apartments.
This begs the question. Are apartments counter-cyclical and immunity to economic shifts that negatively impact other types of real-estate?
It appears that the demand for rental housing is impervious to economic downturns and other key real estate variables. The fact is that workers always ‘need’ housing. Current trends support constant demand for multi-family units. Younger millennial renters and many boomers are downsizing their abodes. While some are, in fact, opting to purchase smaller homes, many are exiting homes altogether and re-entering rental units.
Underwriting for this asset class has been increasingly sound. Pre-recession due diligence proved adequate enough for multifamily loans to perform well during the downturn despite the monumental distress that occurred with debt supported by other commercial real estate classes.
Ultimately, if the property is efficiently operated, has adequate cash reserves, and has secured long-term debt, the asset should perform due to the national demand for rental housing as it is simply here to stay.
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