Despite recovering volumes, falling vacancies and increased rent growth, the multifamily sector continues to face risks, analysts said.
"The markets--both debt and property--are very healthy, vibrant and in balance," said Mark Beisler, managing director with Wells Fargo Multifamily Capital, McLean, Virginia, at the Mortgage Bankers Association's (MBA's) Commercial Real Estate Finance/Multifamily Housing Convention & Expo in Orlando, Florida, in February. Beisler chairs MBA's Multi-family Council.
"Both agencies and banks are navigating well," Beisler said. "They're certainly anticipating more competition in 2014 over 2013, but they're prepared for it and entering the market with eyes wide open. They're going to compete on price over credit."
Beisler said he has observed a "blurring of lines" between capital sources. "Life companies are more active in construction lending; banks are entering the permanent market and doing more seven-and 10-year business," he said. "And multifamily is going to be a bigger component of the commercial mortgage-backed securities [CMBS] market going forward."
"Overall we're in a very good place nationally for multifamily," said David Durning, president and chief executive officer of Prudential Mortgage Capital Co., Newark, New Jersey. "Nationwide vacancy rates are at about 4 percent and headed down--they're approaching their lowest levels in 13 or 14 years. We're really at a pre-crisis normalization where you have 2.5 percent rent growth, which is also a healthy place to be. At 5 percent annual growth rate, income is at a healthy and attractive level. Finally, on an overall basis, multifamily pricing is back to peak levels and moving forward from there."
Duming added the apartment market "shows a positive dynamic between supply and demand."
Gregory Reimers, northeast market manager of real estate banking with JP-Morgan, New York, said he feels "very good" about multifamily. "Our various multifamily businesses have performed relatively well. Demographically, we still feel very good about the markets that we're operating in," he said, adding JP-Morgan plans to grow its multifamily lending platform this year.
Some take a more cautious look. "We're very healthy in terms of multi-family," said David Brickman, senior vice...