Market News

Perspective on Multifamily Investor Sentiments   

Investor Sentiment

The recent CBRE 2024 Global Multifamily Investor Intentions Survey offers valuable insights into multifamily real estate trends and investor sentiment. And while enthusiasm from investors is evident, broader economic and market factors are tempering the optimism. The 1,200 worldwide commercial real estate investors surveyed had assets under management of up to $50 billion. And more than 500 specified the residential/multifamily sector as their primary target. Read on for my perspective: 

High Investor Preference for Multifamily  

Multifamily remained the most preferred sector, with investor preference jumping to 42% this year from 30% in 2023. This increase likely stems from the Federal Reserve hinting at interest rate cuts. However, persistent high interest rates and limited credit availability are concerns for more than 80% of respondents. Consequently, there’s a moderate shift towards lower-risk (i.e., core and core-plus) strategies, which rose to 33% from 27% in 2023. The percentage of multifamily investors favoring high-risk (opportunistic, distressed) investment strategies fell to 47% in 2024 from 50% in 2023.  

Half of surveyed investors anticipate challenges due to weak resident demand—a significant increase from only 15% in 2023. Concerns over persistent high inflation have decreased, with 26% citing it as a top challenge, down from 31% in 2023. And most multifamily investors surveyed are optimistic about a recovery beginning for both their organizations and the market by the latter half of the year. By mid-2025, almost all investors believe that the multifamily investment sector will be experiencing a recovery. 

Regional Market Dynamics 

The appeal of the multifamily sector varies across the U.S., with the Sun Belt a key investment destination. Dallas-Fort Worth leads (40%), up from 36% in 2023, followed by Nashville and Raleigh-Durham (21% each), Atlanta (20%), and Miami and Charlotte (19% each).  

Top 10 Most Attractive Markets for Investment, 2024


Source: CBRE Research, January 2024

Diversification Strategies 

Investors increasingly are exploring multifamily alternatives, such as student housing, senior living, and build-to-rent/single-family rental (BTR/SFR) properties. This reflects a strategic attempt to diversify within the sector, catering to evolving demographic and lifestyle trends.  Among American investors, BTR/SFR emerged as the leading multifamily alternative, favored by 39%, and was second only to real estate debt at 41%. 

Anticipated Recovery in Investment Activity 

Sixty-two percent of multifamily investors anticipate increasing purchasing activity this year: 38% expect an increase of at least 10% over 2023, compared with 35% of office investors and 29% of industrial investors. Particularly in the Americas, 41% of multifamily investors foresee a purchasing increase of at least 10% in 2024. Most investors (62%) plan to ramp up purchasing activities, while 40% expect to sell more in 2024. Multifamily had the highest percentage of investors (27%) expecting to sell less this year.   

Regarding pricing expectations, nearly 60% of respondents anticipate few or no discounts on multifamily assets this year, while only 34% expect moderate to large discounts, a decrease from 44% in 2023. Multifamily assets are among the least likely to see large discounts, with only 6% of respondents expecting them; 20% anticipate no discounts.  

Underscoring current market complexities, 67% of respondents identified mismatches in buyer and seller expectations as a primary challenge. 

Pricing Expectations for Different Sectors, Compared with 2023


Source: CBRE Research, Q1 2024

A Contrarian Investment Approach 

Despite a bullish outlook, there’s a notable trend towards lower-risk investments. Thirty-three percent of investors favor core and core-plus strategies. This cautious approach presents a contrarian opportunity for those willing to take on risk for potentially greater returns via development. 

In 2023, nearly 440,000 new multifamily units were delivered, according to Newmark. A 53% year-over-year increase in supply is expected this year, followed in 2025 by a 42% decrease, which, despite the decline, would still be above historical averages. However, 2026-27 supply is unlikely to reach recent pre-pandemic levels, indicating that developments aiming for completion during that period could face less competition and provide higher risk-adjusted returns. 

Sharply increasing anxiety (50% this year versus 15% in 2023) about weak resident demand is likely spurred by recession fears influenced by the Federal Reserve’s vigorous efforts to control inflation. In economic downturns, it’s typical for consumers to curtail non-essential spending such as travel and entertainment. Yet, housing remains a vital necessity, underscoring its resilience as an investment even in challenging economic periods. 

Where Will Cap Rates Go?  

Separately, CBRE predicts that multifamily capitalization rates will peak this year, with a potential decrease of 50 or more basis points in following years. That is expected to be influenced by decreasing borrowing costs, rising rents and increasing investment activity. While they aren’t expected to revert to pre-pandemic lows, projecting some degree of compression in the coming years could be justified. 

Core CPI, which excludes food and energy, rose 3.8% year over year in March, exceeding prior estimates, while unemployment remained stable. That may give the Federal Reserve reasons to maintain interest rates. However, credit spreads, the other component of overall borrowing rates, are compressing. The U.S. Corporate BBB Option-Adjusted Spread is significantly lower than the previous year (1.13% versus 1.76%) and below the long-term average (1.95%), indicating more favorable borrowing conditions, according to the Federal Reserve Bank of St. Louis.  

The Housing Market’s Underlying Resilience  

The disparity between housing starts and household formations from 2014 to 2023 underscores the strength of the housing market. During this period, 14.7 million households were established—about 1.5 million per year, according to St. Louis Fed. But only 13 million housing units started construction, an average of 1.2 million, including both single-family (8,827 units) and multifamily units (4,157 units, 94% intended for rent), according to the U.S. Census. This longstanding gap should mitigate worries over short-term weakened resident demand. 

And as of year-end 2023, the average monthly cost of homeownership exceeded apartment rents by 59%, according to Newmark research. Despite predictions that the difference might shrink due to adjustments in home prices, interest rates and rent growth, it is likely to remain substantial enough to encourage current renters to continue renting. 

The survey’s sentiments towards transaction activity recovery seem solid. Separate CBRE data indicates that real estate prices fell 18% from July 2022 to February 2024, with the rate slowing significantly by February to 8.9%. This suggests the market may be nearing its bottom, contingent on stable interest rates. Yet, transactions since July 2022 might not fully reflect the market due to incomplete or uninitiated deals.  

According to CBRE, broker opinion of value (BOV) activities have surged by 50% to 100% year over year, but only about 25% have led to actionable events (i.e., an asset marketed for sale). The current market shows a scarcity premium, with increased competition and institutional interest highlighting the valued nature of multifamily assets. 

This article is intended for informational and educational purposes only and is not intended to provide, and should not be relied on, for investment, tax, legal or accounting advice. The information is provided as of the date indicated and is subject to change without notice. Origin Investments does not have any obligation to update the information contained herein. Certain information presented or relied upon in this article may come from third-party sources. We do not guarantee the accuracy or completeness of the information and may receive incorrect information from third-party providers.