(May 28, 2024) -- Whether you tally by total dollar volume or number of physical properties, multifamily investment continued to tumble in the first quarter of 2024, according to data from RealPage. Tucson's multifamily market is holding up better than the US National average.
Investments in U.S. apartments continued to decline in the first quarter of 2024 amid the high cost of borrowing and economic uncertainty. Though the asset class remains an attractive commercial real estate investment, sales have fallen well below pre-pandemic levels. Nearly 1,040 apartment properties changed hands at a value of $20.6 billion during the first quarter of 2024, according to MSCI Real Capital Analytics.
The overall sales volume during the quarter was down 25% from the first quarter of 2023, while the number of properties trading hands was down 26% during the same period. This was well below the 4th quarter 2021 peak when around 5,400 properties changed hands for more than $166 billion due to pent-up demand following the onset of the pandemic. Recent activity was also well below the $42.2 billion quarterly average during the five years leading up to the pandemic (2015-2019).
Before the pandemic, the value of quarterly apartment transactions hadn’t fallen below $21 billion since 1st quarter of 2014. The average price per unit, while above pre-pandemic levels, has also declined, registering at $190,184 in 1st quarter, down 6.5% year-over-year and the lowest level in three years. By comparison, per-unit pricing from 2015 to 2019 averaged roughly $151,000. Meanwhile, cap rates for apartment transactions in 2024’s 1st quarter were up 50 basis points (bps) year-over-year, averaging 5.7%. That was the highest cap rate in nearly eight years. Still, multifamily cap rates during 1st quarter remained the lowest among major property types.
Tucson's sales volume increased 35.48% from apartment transactions in Q4 2023 when a $132.5 million student housing transaction in Q1 was removed from the equation. The number of properties remained almost the same, from 508 units in Q4 2023 to 502 units in Q1 2024. During this period, Tucson's price per unit also increased by 30.67%.
"As we ended 2024’s first quarter, the U.S. economy signaled continued resilience, with mixed expectations ahead. The narrative was bright for Tucson, where household income rose appreciably by 2.9% over the year, reaching $68,500, playing a role in propelling consumer spending. Robust real GDP expansion of 3.1% nationally bolstered talk of a soft landing. Inflation, which had been steadily retreating, settled at a CPI increase of 3.0%, a notable deceleration versus the 5.7% posted a year earlier. Tucson’s nonfarm employment charted moderate growth, with a 0.7% increase. Meanwhile, Tucson’s unemployment rate ticked up negligibly to 4.1%, indicative of a stable labor market. Amid economic optimism and stable employment, Tucson mirrored the broader national trends toward sustained economic growth."
~Allen Mendelberg and Joey Martinez in C&W PICOR Q1 Marketbeat Report Q1, 2024.
