2017 Multi family outlook

A large difference in the outcomes of growth between many of the real estate markets is their unique natural features. For example, San Francisco is land constrained while Orange County and San Diego offer more room to grow because they have lower density. With such dense areas, the cost to build on land is pretty damn expensive. And although most people are feeling pretty confident in the commercial real estate, one sector that is met with some uncertainty – is multifamily. The reason for this is in recent years, with the scarcity of land to build on, developers are finding it more lucrative to build luxury apartments because of the higher rental income that is generated. During these times, luxury apartments were being constructed at a much higher rate than lower end apartments. However, the demand (yuppies, techies, etc) for these higher end apartments may have finally caught up with supply and the rents may start to adjust. San Francisco is one market that is starting to see the affect. Don’t get me wrong, there is still plenty of demand for lower end multifamily. The lower/middle end multi family is still growing at a nice steady pace. But a hit to the luxury multi family market will show a lower overall growth in the market and result in what seems to be, a slowdown in the multi family market.

 

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