4 Reasons Apartment Investment Properties Will Outperform in 2022
Throughout 2021, the demand for apartments in the United States remained robust as the economy rebounded and recovered from the pandemic. Rising occupancy in rental apartments continued to grow, with the market absorbing 101,132 apartment units according to National Association of REALTORS®. This brought the total net absorption of units to 1.05 million during Q2 of 2020 through Q4 of 2021 (as of October 23rd). This was substantial when compared to Q4 2019 (pre-pandemic), which only saw 38,445 units absorbed according to National Association of REALTORS®.
Multi-Housing News found that the rental property market for 2021 saw the single-family rental sector move ahead of the multifamily rental sector with a 13.9% year-over-year improvement. Still, the multifamily market experienced immense growth, with rents rising 11.4% year-over-year in 390 metro markets in the last three quarters of 2021.
As we head into the new year, it’s forecasted that apartment demand and rent will remain strong, especially in the commercial space where prices are recovering. Let’s look at four reasons apartment investment properties will outperform in 2022.
Commercial Real Estate Market is Rising
In 2021, the absorption of apartments in the real estate market rose substantially and reached its highest level in over a decade. As of October 23rd, 2021, there was a net absorption of 741,592 apartments over 12 months according to National Association of REALTORS®. As we look toward 2022, this sector is forecasted to continue to increase as renters demand more apartments in booming markets like the South Region.
Rent Growth Increasing in Key Markets
As apartment prices are bouncing back after the pandemic, rent growth is rapidly increasing in 127 of 390 metro areas according to National Association of REALTORS®. One state that is showing positive signs of rent growth is Florida in metro areas like Tampa, Palm Beach, Sarasota, and Fort Myers. This is because markets like Florida and the South region are more affordable for renters to live in. As a result, more people are migrating here and increasing the demand for more rental housing construction.
High Mortgage Rates Increasing Rental Demand
As high mortgage rates ease the demand of owner-occupied homes in the market, more individuals will seek to rent apartments. This will increase the demand for rental units and construction nationwide, especially in regions with very expensive housing prices.
Improving Economic Conditions
With 2022 on the horizon, the economy and real estate market continues to improve from the pandemic. Individuals are looking to move into growing markets where there are job opportunities, and their work-from-home lifestyles are supported. According to PwC, the top-ranked real estate markets for 2022 include:
- Nashville
- Raleigh/Durham
- Phoenix
- Austin
- Tampa/St. Petersburg
- Charlotte
- Dallas/Fort Worth
- Atlanta
- Seattle
- Boston
These real estate markets have been able to experience impressive growth due to their retention of economic power and ability to regain jobs lost much quicker amid a pandemic than places like Manhattan and San Francisco.
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