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CONTRIBUTORS

Indraneel Karlekar

Global Head of Research & Strategy
Clarion Partners

Preview

Over the past decade, US multifamily has been among the most sought-after sectors by institutional investors due to its necessity characteristic, the underlying strength of property level fundamentals, and high historic risk-adjusted total returns. It has remained an integral part of commercial real estate (CRE) investment portfolios with a portfolio weighting of 29.1% in the NCREIF Fund Index-Open End Diversified Core Equity (NFI-ODCE).1

Key takeaways:

  • Macro drivers are sustaining rental housing demand primarily due to two macroeconomic factors:
    • The national housing shortage
    • Favorable demographics: robust renter base in all generations
  • Financial headwinds: Acute for-sale housing affordability challenge persists:
    • Cheaper to rent than to own in most metros
    • US for-sale housing price has continued to climb
    • Many US counties report a home price above the national median
    • Explosion in renter households
    • Rise in cost-burdened households
  • Ongoing shift: Sun belt lure and suburban boom
  • Multifamily investment performance is strong, especially in select segments

Clarion Partners believes that well-located, high-quality rental housing will continue to be a strong performer over the long term due to a variety of macro, demographic, and financial factors.

ENDNOTES

  1. NCREIF Property Index. Q4 2023. Note: The NFI-ODCE is a capitalization-weighted, gross of fee, time-weighted low leverage return index with an inception date of December 31, 1977

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