Asked to gaze into their crystal balls and forecast trends for the next 12 months, multifamily experts weighed in on everything from financing to fitness centers, access control to adaptive reuse and Gen Zs to EVs. When all was said and done, we winnowed our list to a dozen fearless forecasts for 2024’s multifamily field.
1. Rents high, occupancies stable
The mix of high mortgage rates, tight home inventories, and other factors will mean potential home buyers will confront headwinds affording a home purchase. So, with multifamily residents staying put for longer, rents will remain elevated. According to Mary Le, an economist at Moody’s Analytics, rising rents are expected to disproportionately impact low- and moderate-income households in securing housing. Occupancies will remain solid as the large number of units delivered in the past few years will continue to be absorbed at a steady pace.
2. Production reduction
Construction financing is expected to fall in 2024, potentially slowing multifamily projects. The high-interest rates meant to curb inflation are causing this decrease. Michael Lee, principal & partner at HKS Real Estate Advisors in New York City, explains that this macroeconomic strategy will ripple through the construction and development sector, influencing the trajectory of multifamily projects on a national scale. Additionally, the absence of the 421a tax abatement in New York City will make multifamily projects less viable, but it will also provide impetus for more innovative solutions.
3. Below replacement cost
Investors in the new year will focus on buying multifamily properties below replacement cost. Core assets in favorable locations are being priced 25 to 35 percent below replacement costs. This pricing trend remains consistent across most markets, indicating the widespread pricing displacement across regions. Roberto Casas, senior managing director & multi-housing group leader with JLL Capital Markets in Dallas, predicts that this dynamic will cause a further slowdown in urban supply pipelines.
4. Senior Living Boom
Baby boomers will continue to be trendsetters in 2024. As the first boomers near their mid-80s, prime age for independent and assisted living, the senior living sector will experience growth. Jeffrey Levine, founding principal and chairman of Douglaston Development in New York City, believes that the need for senior living facilities is apparent, and he predicts that the senior living business will have its best years in the near future.
5. Hotel-inspired wellness
Multifamily communities will incorporate hotel-inspired health and wellness design. This includes tranquil green spaces, state-of-the-art fitness centers, smart technology, and biophilia. Sonya Haffey, principal at multidisciplinary South Florida-based interior design firm V Starr, states that this increased need is driven by changing lifestyle preferences, a growing awareness of health and wellness, and the impact of the COVID-19 pandemic. The goal is to create spaces that promote a balanced, wellness-focused lifestyle.
6. Finding the best buyers
Given the difficulty of raising equity in the current environment, multifamily property sellers must be careful in selecting buyers. Dan Price, senior vice president of MLG Capital, advises sellers to target buyers with discretionary equity and a track record of making it to the closing table. To ensure the best buyers and execution, many sellers may choose to sell off-market or through a quietly marketed sale process.
7. Maximizing experiences
Luxe multifamily operators need to stand out from competitors to drive NOI. Lisa Yeh, president of Sentral, a national property management company, believes that operators will have to adopt innovative approaches to provide unique resident offerings. This can range from exclusive food-and-beverage events to concierge services. Creating memorable experiences is more important than ever, as consumers have more choices than ever before.
8. Proptech consolidation
The multifamily industry continues to swiftly adopt technology solutions. However, ensuring that these systems are not redundant and efficiently complement one another is a challenge. Joya Pavesi, executive vice president of marketing and strategy for property management firm RKW Residential, predicts that the new year will bring increased focus on developing a unifying ecosystem to address disparate software applications. This unified ecosystem will streamline workflows, enhance data visibility and accessibility, and make operations more efficient.
9. Cup o’ joe
Coffee bars will become more common in apartment buildings. Architects and designers predict a growing inclusion of coffee bars in multifamily communities. Well-designed coffee bars create a striking focal point that appeals to people of all ages. These coffee-focused spaces can catalyze resident interaction throughout the day and support work-from-home productivity.
10. The right mix
Rich and mixed-use communities that embrace residential, commercial, retail, food and beverage, entertainment, performing arts, and green space will be the most vibrant and dynamic. Brian Pilot, principal at STUDIOS Architecture's Washington D.C. office, believes that multigenerational and socioeconomically diverse communities with a broad array of socialization opportunities, amenities, and services are the key to creating thriving communities.
11. Supply-demand reversal
The construction pipeline of multifamily deliveries in early 2024 may exert a negative impact on Class A rents as supply outpaces demand. However, this is expected to be short-lived. Construction starts slowed in 2023 and are projected to continue slowing in 2024. Justin Shay, managing director of BermanCRE, believes that the impact of the lack of new construction starts will not be felt until 2025 and 2026. This slowdown in deliveries will help tighten submarket vacancy and increase rents.
Icon Marina Village, V Starr. Image courtesy of The Related Group
12. Adaptive reuse on the rise
Sustainability consciousness, along with cost issues, will foster continued growth of adaptive reuse as a prevalent design and construction movement in multifamily. Eric Greenfield, real estate division chair at Polsinelli Law Firm, predicts that the redevelopment of old warehouses, factories, schools, office buildings, and other assets into multifamily will persist among developers in 2024 and beyond.
In conclusion, the multifamily industry is poised for an eventful year in 2024. From elevated rents and stable occupancies to the rise of senior living and adaptive reuse, these predictions provide valuable insights into the trends and changes that will shape the multifamily landscape. With a focus on wellness, unique experiences, and creating vibrant communities, the industry is set to evolve and adapt to meet the needs of residents in the years to come.
