As of April 2021, multifamily apartment buildings are experiencing a strong level of demand from investors. With many questioning if this is a blip on the radar or a sustainable trend, I want to break down what drives demand for multifamily apartment buildings from investors.
Investor Interest Spikes During the Pandemic
We have seen a spike in interest from investors for multifamily properties in Canada relative to other commercial asset classes.
Apartment buildings have long been referred to as the recession-proof or recession-resistant asset class, key economic indicators will show why this continues to be the case during the current global crisis and beyond.
Key Factors That Will Continue to Drive Multifamily Demand
Multifamily has traditionally been the most stable asset among commercial real estate sectors. While its yield has reflected that in slightly lower cap rates compared to retail, office and industrial; investors have sought its stability to occupy a portion of their portfolios.
Relative to other parts of the world, Canada continues to be perceived as a safe and secure region to park investor capital. This, along with the stability of multifamily, continues to attract foreign investment through institutional investors.
2. Unit Supply
Housing supply has been and continues to be an ongoing issue in Canada. With housing supply lagging the demand, rental rates will continue to see upward pressure. With increasing rent rates and no indicators of a decline in the foreseeable future in most major markets, multifamily is set to continue a steady growth in value.
3. Population Growth
Canada is a hotspot for immigration, and more specifically, the Greater Toronto Area and its surrounding municipalities. While immigration has come to a screeching halt due to the pandemic, the federal government has indicated a continuation of immigration policies to continue allowing over 300,000 immigrants into the country over the coming years. The markets most of the influx new Canadians will end residing in are already feeling the heat of a high demand rental market.
While still achieving rent rate growth in 2020, Canada experienced a slowdown in the growth of rent rates on average across the country. This dip is expected to reverse in the foreseeable future.
4. Job Growth
The growth in job opportunities must also be present in order to experience healthy growth in multifamily. As the population grows, so does the need for opportunities to earn income to pay for housing. With Canada leading the G7 in expected employment growth over the coming four years, this in turn will have a beneficial impact on rental housing.
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About the Author:
Mark Baltazar, Co-Founder of Peak Multifamily Investments
With 18 years of experience in business strategy and corporate consulting on the global stage, Mark brings a wealth of business management and operational expertise to real estate investing. Winner of the Real Estate Investment Network’s Top Player Award in 2017, Mark continues to build strong momentum in growing his real estate portfolio.
His strong analytical background enables him to bring a strategic rigour to portfolio expansion and the assessment of investment opportunities.
With five years of real estate investing experience across various strategies, Mark oversees Peak’s capital raising, client acquisition, partner relations, educational content development while ensuring the company delivers on its promise of helping others build generational wealth through apartment building investing.