Apartments Continue to Enjoy Strong Pricing

Posted on February 22, 2021

While several commercial property sectors have struggled throughout the pandemic, apartments have remained strong.

Case in point: In February, almost a year after the pandemic locked down the economy, nearly 80% of renters were still making full or partial rent payments, according to The National Multifamily Housing Council. That was only a 1.9-percentage point decline from February 2020—before the pandemic began.

With that sort of resiliency in its revenue stream, it should be little surprise that apartment prices have weathered the pandemic well. Mid- and high-rise prices experienced a very, very slight drop of 0.2% as some apartment residents left cities for the suburbs, according to Real Capital Analytics (RCA). But garden apartments, which captured many of those people leaving urban areas, saw their pricing grow a robust 9.0% in 2020.

By comparison, values tumbled in many other commercial sectors. Full-service hotel prices 14.3% from 2019 to 2020 as business travel and conference business dried up. Retail was also slammed by the pandemic, leading to price declines. While prices only fell 1.8% year-over-year for shops, retail centers declined 3.3%, according to RCA.

Along with industrial, apartments have been a safe haven during the pandemic. That stability should pave the way for more growth in 2021. And it should attract more investors.

As institutional investors reenter the market, CBRE expects deal volume to improve to about $148 billion in 2021. While that is lower than the record-high $191 billion of transactions in 2019, it is a 33% gain compared to the estimated $111 billion that sold in 2020.

With that sort of volume, apartments should once again be the top sector for commercial real estate transactions in 2021.

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