Construction + Economy

Is The Multifamily Real Estate Market In Trouble?

It’s widely known that the office real estate market has been severely hurt by the COVID-19 pandemic, and in fact, continues to get worse even after the pandemic is over. This is largely due to the persistence of work-from-home for a significant portion of the workforce. The national office vacancy rate rose to a record-breaking 19.6% in the fourth quarter of 2023, according to Moody’s Is The Multifamily Real Estate Market In Trouble?Analytics. That’s the largest quarterly increase since the first quarter of 2021, and larger than the 19.3% level reached twice in 40 years. The average pre-pandemic office vacancy rate was around 16.8%. Some major cities’ office vacancy rates are much higher than the 19.6% national average. Detroit ended December at 25%, Houston at 24%, and San Francisco at 23.6%.

The high office vacancy rates have directly led to other office real estate problems. One is rapidly growing debt in office real estate. The other is a dramatic declines in some office building valuations and appraisals.

What’s less talked about is a similar problem emerging in the residential multifamily real estate market. The cause is again the large-scale shift toward work-from-home. Multifamily buildings who fail to provide properties with necessary work-from-home connectivity technology, are beginning to see increasing vacancy rates. As happened in the office real estate market, growing multifamily vacancy rates will lead to significant declines in some property values, and increasing debt. The same work-from-home shift that has been hollowing out the office real estate sector is now undermining multifamily real estate.

More information is available here.

Image: Pexels.com

 

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David Shiller
David Shiller is the Publisher of LightNOW, and President of Lighting Solution Development, a North American consulting firm providing business development services to advanced lighting manufacturers. The ALA awarded David the Pillar of the Industry Award. David has co-chaired ALA’s Engineering Committee since 2010. David established MaxLite’s OEM component sales into a multi-million dollar division. He invented GU24 lamps while leading ENERGY STAR lighting programs for the US EPA. David has been published in leading lighting publications, including LD+A, enLIGHTenment Magazine, LEDs Magazine, and more.

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