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Multifamily Apartment Originations Expected to Increase During 2021


Multifamily apartment owners weathered the 2020 pandemic better than property owners in many other sectors. While there have been challenges, multifamily apartments remain a valuable investment and recovery is expected.

Challenges Faced by Property Owners During 2020

2020 was full of new challenges, and while it was a tough year, multifamily apartment owners benefitted from an investment that remained more stable than many others. Owners of retail properties and office space, for example, have seen significant challenges and will continue to do so. This is predominantly due to a large oversupply, caused by the dramatic shift towards a work-from-home culture.

The main challenge for multifamily apartment owners during 2020 was enduring decreased rental income, due to delinquencies, and deferred rents negotiated between renters and owners.

Predictions for Urban vs Suburban Submarkets

We predict that the suburban submarkets will benefit more than the urban submarkets throughout 2021. 

The suburban submarkets have become more appealing to those that are now working from home.  With a growing remote workforce, there is no longer the need to be in close proximity to downtown urban areas. It’s also unnecessary to consider commute time, live within walking distance of your office, or close to public transportation.  In 2020, many large cities such as New York, San Francisco, and Washington D.C. saw double digit rent decreases and increased vacancies as renters moved to suburban areas that offered more space, reduced rent, and a safer alternative to highly populated areas with an increased risk of the transmission of COVID-19.  Freddie Mac also expects to see rent growth in smaller cities and submarkets in 2021. 

We expect demand to return to urban areas once the virus is further controlled and health risks are minimized. As more of the population is vaccinated, there should be a slow increase in occupancy and rents in these areas. 

Predictions for Multifamily Apartment Recovery

Many forecasts are predicting a recovery in vacancy levels by the end of 2021 with a full market recovery by early 2022. 

Despite the economic impact of the pandemic, occupancy levels of Class B and Class C properties have remained higher than in previous recessions.  Class C properties had the highest delinquency rates out of all property classes, in part due to the many renters that work in the retail, hospitality, and restaurant industries. However, Class A properties were affected the most, due to new supply and a younger workforce seeking less expensive housing away from the urban city centers. 

Expected Increases in Loan Volumes

It is predicted by the Freddie Mac Multifamily 2021 Outlook that by year end, overall multifamily volume will reach $340 billion, an increase of 18.5% from the 2020 estimate of $287 billion

There are several reasons for the expected increase in loan volume:

  • The pandemic caused a lag in loan volume due to economic uncertainty.
  • Government intervention, including halting evictions, stimulus checks, and unemployment extensions, helped stabilize the multifamily apartment market.
  • Interest rates have remained low, providing opportunities for existing owners and new investors. 

Overall, the multifamily apartment market has been a great investment for investors that have withstood the ups and downs of the market.

Secure your Multifamily Apartment Loan

LSG Lending Advisors specializes in helping clients secure loans for the new construction, purchase, or refinancing of multifamily apartments. To make the most of your investment and secure the loan you need, contact us today.

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