MULTIFAMILY

2021 U.S. Real Estate Market Outlook

HERE’S WHAT CBRE SAID ABOUT THE PATH TO FULL RECOVERY IN 2021

Multifamily weathered the 2020 recession better than most property sectors—only industrial held up better—and market deterioration was far less than in previous recessions. Still, it was a tough year for multifamily as many owners lost rental income plus ancillary income from waived fees, deferred rents and delinquencies.

CBRE forecasts a return to pre-COVID vacancy levels and a 6% increase in net effective rents next year, with a full market recovery occurring in early 2022. The economic rebound will lead to rising multifamily demand, largely from “unbundling”—certain renters moving out of their parents’ homes or those of friends as job opportunities provide more financial flexibility to live independently. Demand levels in 2021 likely will fall short of pre-COVID peaks in 2018 and 2019 but should rise significantly from 2020.

Vacancy rates for affordable multifamily housing will remain relatively low in 2021. Unlike in previous recessions, more affordable housing inventory (Class B and C) maintained low vacancy rates and modest rent growth in 2020. Class C properties had higher delinquencies.

Class A assets were impacted the most by COVID-19 this year due to higher turnover from young adults moving back home, steady delivery of new supply and renters seeking less expensive housing. Class B assets should continue to outperform in 2021 with low vacancy and steady rent growth. Class A assets may not begin recovering until midyear.

Development will remain robust next year. Most of 2021’s scheduled deliveries were started long before COVID-19 and likely will reach 280,000 units on top of the estimated 300,000-unit total this year. This level of new supply will temper improvement in Class A vacancies and rents in many markets.

FIGURE 15: MULTIFAMILY INVESTMENT TO REBOUND WITH 33% GROWTH IN 2021