6 Commercial Real Estate Investing Trends for 2021
2021 is shaping up to be a very interesting year for the multifamily housing market. So many factors are influencing investment and financing – rental demand, demographic trends, construction costs, tax incentives, green building and interest rates.
And the impact of COVID-19 continues to be felt across the board, from secondary market demand to must have amenities.
In my view, the 6 trends below are what commercial real estate investors and lenders in the multifamily space will focus on in 2021.
I welcome your comments!
1. Strong Multifamily Rental Demand
The main drivers will be demand from both younger and older adults. Many factors add to the forecasted rental demand – the cost of living coupled with student loan debt leaves many unable to make a down payment, young adults are marrying later and delaying having children, and empty nesters are looking for more flexible downsizing options.
Young workers are enjoying remote work and their freedom to migrate. Why settle down when the world is your playground?
2. Strength in Selected Sectors
Multifamily housing demand will remain strong, with a focus on workforce housing, student housing, and senior and assisted living. Demand for flexible office space will remain strong.
3. Strength in Secondary Markets
Investors will continue to focus on secondary and tertiary markets to find attractive returns. These markets have more affordable housing, lower construction and living costs and strong demographics trends. COVID definitely had its challenges for real estate investors, but with ‘work from anywhere’ now the norm, secondary markets are in even more demand. The workforce remains happily ‘untethered’.
4. Focus on Qualified Opportunity Zones
Although there are many details which need to be sorted out, multifamily investors with large capital gains are looking at Qualified Opportunity Zones (QOZs) as a tax deferral option. Some estimates of unrealized capital gains in U.S. households are as high as $4 trillion. Shovel-ready projects are seeing high investor interest.
5. COVID Will Impact Multifamily Design and Demand
Property owners and managers are reacting to changes in rental demand due to COVID-19. Renters are looking for more green space and more amenities which address revised health and safety concerns.
Balconies are in demand in NYC (source, the New York Times)! New buildings are featuring small balconies even on studio apartments.
Pet ownership is up significantly, especially dogs. Amenities for pets are in high demand in all property types.
6. The Effect of Interest Rates
No forecast for multifamily loan rates for 2021 would be complete without a comment on interest rates. A spike in commercial mortgage interest rates would have a negative impact on the market, but most market observers expect rates to increase only slightly during 2021. Fed tapering and tightening could impact rates further in late 2021 and into 2022.
There are some great opportunities in multifamily investing in 2021 along with many different creative financing options. If you’d like to discuss your project and the best way to get it funded with the author Jeff Bardos, schedule a call or call/text him now at 203-247-4358.
Read about Must Know Financing Considerations for Multifamily Properties
Read all about Multifamily Commercial Property Loans
Read about Freddie Mac Small Balance Multifamily Financing
About the Author
Jeff Bardos, CEO, Speritas Capital Partners
Jeff has over 30 years of experience in the financial services industry. After graduating from the Columbia Business School, he joined the New York Federal Reserve Bank as a senior staff member in Bank Supervision, leading the Bank Analysis department. From the nation’s central bank, Jeff moved into the private sector, working at senior levels in commercial banking, retail banking and risk management. He has also played senior founding roles in several start-ups. Learn more about Jeff.
Speritas Capital Partners specializes in complex credit, collateral and cash flow situations and we never take upfront fees.
Because Speritas Capital is a debt advisory firm, we have access to a wide variety of lending structures. We’re not beholden to any one lender or structure so we can use our creativity and experience to design a structure that truly fits the needs of our clients.