Institutional Investors Are Bullish on Multifamily

Posted on November 24, 2021

Man on High Rise Apartment BalconyThe asset class is delivering a bond-like return, according to two institutional owners at the Multifamily conference last month.

There are a lot of reasons to invest in multifamily today. Following the pandemic, apartment investors are enjoying substantial rent growth, record low vacancy rates and an attractive supply demand imbalance.

Institutional capital playing in the core and core-plus market, is more attracted to the stability of the asset class over the long term.

Cameron Jones, managing director of US Housing Strategic Transactions at Nuveen, and Angela M. Kralovec, VP of reinvestment and redevelopment at Essex Property Trust, discussed how institutions take a different approach to apartment investing.

“We like multifamily because it provides a bond like return, and because it provides an inflation hedge because leases turn on the regular,” said Kralovec. Jones agreed, adding what she called the obvious—multifamily is the only truly essential asset class. “We don’t need a mall for living, and we don’t need an office space to work.” For that reason, multifamily has a durable income stream.

Jones said Nuveen is focused on demographics and changes in housing needs related to those demographics. For aging millennials, for example, the company will focus on single-family rentals and larger units, or it is focused on service-based amenities for residents in need of naturally occurring affordable housing.

For acquisitions, Essex focuses on properties that they can buy at scale. It does little trading, opting instead to hold the properties in the long-term, and it needs to see strong fundamentals in the markets where it is active that will support long-term growth.

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