JLL’s Report on What’s Hot in 2020

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The multifamily market’s strong performance is expected to continue in 2020, as several key factors have aligned to keep the sector humming, according to JLL’s recently released report on multifamily in the U.S.

In its report, the brokerage firm found that in 2019, multifamily once again was the most liquid asset type in the country, with approximately $167 billion in transaction volume last year.

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Investors have continued to plow large amounts of capital into the market, while an abundance of debt and equity is available.  JLL expects that some sellers will look to get deals done before the 2020 presidential election heats up, potentially leading to a high amount of transaction activity in the first two quarters of the year.

As the cost of housing has soared in cities with major tech hubs like San Francisco and Seattle, alternative concepts created to ease the burden, like co-living and short-term rentals, are getting more attention from investors, who are eager for yield in the current pricing environment. JLL found that the co-living pipeline will soar through 2022, to nearly 20,000 nationwide, as investor interest has led to greater institutionalization of the space.

Where strong performance will continue

The Sunbelt region is forecasted to continue its domination in rent growth nationally, led by the Las Vegas and Phoenix markets, which grew nearly 10 percent through the third quarter of 2019, according to the report. Sunbelt metros are booming as a result of high population growth and corporate relocations and expansions.

While the Sunbelt is attracting more residents with lower housing costs and growing job opportunities, investors are also looking toward the coasts for future opportunities. Recent rent regulation laws passed in California, Oregon and New York have driven interest toward new development product along the West Coast and Northeast, since new multifamily is often not included in rent regulations laws, according to the report.

“Although this type of legislation introduces greater uncertainty into the long-term performance of the asset class, current leasing fundamentals indicate the impact of such bills will be minimal in the near- to mid-term,” JLL wrote about the impact of rent laws in the report.

Though capital for multifamily properties is abundant, confirmed by the high amount of fundraising activity targeting the sector, investors are still choosing value-add assets. The segment has attracted the strongest interest from investors recently, JLL found, which has led to competitive bidding pool and prices driven up to new highs. Meanwhile, markets with strong fundamentals in population growth, talent, education and tech hubs will continue to draw investors.