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Investcorp Releases Real Estate White Paper on Resiliency and Growth of US Multifamily Real Estate

2 Nov 2021

Investcorp, a leading global provider and manager of alternative investment products, today released a new white paper outlining the key drivers of growth within the multifamily real estate sector in the United States. The report analyzes the current US macroeconomic outlook and changing dynamics from COVID-19 and how these have supported the multifamily sector.

“We entered this year with more optimism on the state of the global economy than in 2020, but still remained attentive to how business and lifestyle changes stemming from the pandemic may have both temporary and lasting influences on the US real estate market,” said Michael O’Brien, Co-Head of Real Estate North America, Investcorp. “As we head into the final quarter of the year, we now have a clearer picture of COVID-19’s impact and the real estate sectors that will face the most turbulence as a result. Given strong economic fundamentals, a housing supply shortage and changing lifestyle needs driving rental demand, our outlook for multifamily remains resilient and bright.”

Key insights highlighted in the report, include:

  • As seen since the onset of the pandemic and driven by the persistent need for housing, the multifamily sector is typically viewed as recession resilient and stable. Multifamily real estate assets can act as a potential safeguard against economic conditions including volatility and inflation.
  • Millennials (between 24 – 40 years old) and Generation Z (under 24 years old) renters have been one of the main drivers of the increased multifamily renting lifestyle, as they continue to focus on liquidity and mobility, partly due to increasing student debt and changing lifestyle dynamics including delayed marriage, changes in family planning and increased divorce rates.
  • Millennials now comprise the largest generation in the US labor force and their behaviors are having a distinct effect on society and real estate, from increasing student debt to e-commerce and changing workplace preferences and the integration of technology. COVID-19 has accelerated many of these trends that were already forming prior to the pandemic.
  • Expansion of remote working should also allow more employees to have flexibility to move farther from central city locations and favor lower-cost states.
  • An under supply of housing, particularly since the Global Financial Crisis, is projected to support housing prices and rents for some time to come. Stock of homes for sale is low and new construction is now projected to make up the shortfall over the next five years.
  • Multifamily real estate has outperformed other asset classes over the past two decades, in terms of rental growth and occupancy.

Michael added, “Long before the pandemic, we recognized multifamily in the US as one of the most resilient sectors and we believe that it continues to remain attractive for our clients as a portfolio diversifier, stable income source and inflation hedge. We had sharpened our focus to multifamily real estate investments back in 2014 and continue to be optimistic about the future of the multifamily sector and the continued strength of our North American real estate portfolio.”

In July, Investcorp announced that it had acquired a $420 million US multifamily portfolio, pushing its multifamily acquisitions to over $1 billion over the last 10 months at that time. Today, Investcorp’s current global real estate AUM totals $8 billion, of which $3.4 billion is held in US residential assets. Since 1996, Investcorp has acquired more than 1,025 properties for a total value of more than $21 billion. According to Real Capital Analytics, Investcorp is the 3rd largest cross-border buyer of US real estate, and 4th largest cross-border seller over the full years of 2019 and 2020.

Click here to read the White Paper.