For several years, we have relied on the accuracy of Origin MultilyticsSM, our proprietary suite of machine-learning models, to create rent forecasts in our multifamily real estate markets. Multilytics aggregates and analyzes billions of datapoints per month to pinpoint high-growth areas for potential investment. While it can identify average annual rent forecasts down to the property level, its predictive analytics allow us to create and study a variety of multifamily-specific scenarios.
Since late 2021, we have been incorporating the higher cost of debt and other macroeconomic factors into our study and selection of multifamily investment markets, property underwriting and due diligence. However, Multilytics’ data was pointing to not just a slowdown in rent increases, as many sector observers were predicting, but negative rent growth for at least part of 2023.
We had no illusions that the past two years of double-digit rent increases in many of our markets were sustainable, and neither did other institutional investors. But the divide between how others were characterizing their 2023 outlooks and what our own data was telling us prompted us to compile and publish a new report.
Why We Created the Multilytics Rent Forecast
We believe for several reasons that it’s important to share this data with our investors and the public. First and most importantly, we trust the data provided by Multilytics, which was developed by in-house data scientists and has been back-tested from 2015 onward. Its rent-growth predictions have proven to be accurate to within $10 to $15 annually, according to outcomes back-tested over a five-year period in the 150 largest metro areas.
Second, we are aligned with our investors, and we are committed to accountability with them. We are on this journey together, and that means not being selective about sharing our knowledge and insights but conveying a complete picture of the multifamily sector as we understand it. Informed decision-making leads to better outcomes for everyone.
Third, we are risk managers and pragmatists who work in probabilities. In late 2021, we predicted that interest rates would rise. But we did not simply hope that rent increases would continue to outrun macroeconomic forces. We integrated that assumption into our underwriting and due diligence and began studying a range of scenarios that include the higher cost of debt, among other factors.
Finally, the long-term fundamentals of private real estate investment remain sound, and our outlook extends far beyond 2023. We invest in submarkets with high-potential pockets of growth, and we are well positioned not only to address current challenges but to take advantage of what may be once-in-a-generation investment opportunities as they become available.
Origin Rent Forecasts, Market by Market
The just-released Multilytics Rent Forecast marks the first time we are publicly sharing rent forecasts for Class A multifamily buildings in our investment markets, and it is the first of a series of biannual reports. Through our Funds, we invest in developments across fast-growing cities throughout the Southeast and Southwest, and the report details six- and 12-month rent outlooks for all our investment markets, along with national, regional and gateway city forecasts.
We are predicting negative rent growth in nearly all our investment markets in 2023, with all markets returning to positive rent growth in 2024 and beyond, according to Multilytics. The report covers the following investment markets:
- Texas: Austin, Dallas, Houston, San Antonio
- Florida: Orlando, Tampa, Jacksonville
- North Carolina: Charlotte, Raleigh
- Colorado: Colorado Springs, Denver
- Las Vegas
Please note: This article, presentation and report were produced by Origin Investments and are not associated with our affiliate company, Origin MCF Investco, LLC.