Auction data illustrates owners and sellers adapting to a “new normal” in multifamily residential sector after years of continual growth
Ten-X – the world's largest online commercial real estate exchange and a CoStar Group brand – today released its second Auction Insights Report, which dives into data and trends on the multifamily sector drawn in part from sales of residential properties on the Ten-X auction platform. The report, which is proprietary to Ten-X and includes information and data not available elsewhere, finds the industry at a new crossroads with high interest rates and record-high supply additions drastically diminishing rent growth in most markets. Multifamily property transactions on the Ten-X online auction platform reflect the sector’s newfound dynamics.
Interest in multifamily assets on Ten-X has not flagged - in fact, interest is hitting new heights - with page views on multifamily properties up for auction surging 46% since the first quarter of 2022. Although buyer shopping is surging in this sector, a gulf between buyers’ skepticism and sellers’ optimism is opening. Buyer underwriting of property values has evolved quickly, and they expect to see more affordable prices. Sellers, conversely, have been slower to adjust their expectations. This market-driven trend is laddering up to the widest-ever “value gap” between buyers and sellers for multifamily assets.
“Multifamily has been propelled by tailwinds over the last few years, but external factors, such as continued interest rate hikes and reduced loan to value by lenders, have led to cap rate compression and have prompted a reevaluation of the sector,” said Steven Jacobs, President of Ten-X. “What we’re seeing on Ten-X is not that investors are backing away from investing, but they are being more conservative.”
A confluence of factors are causing investors to proceed cautiously on multifamily, according to a CoStar Group Multifamily Analytics assessment. Rising interest rates have made it more expensive to acquire new properties, and investors face an unprecedented wave of loan maturities coming due over the next three years. Additionally, 2023 deliveries of new supply are expected to be the highest since the 1980s. These factors are decelerating national rent growth from 3.8% in 2022 to 2.6% in the first quarter of 2023. There is some regional variation to this trend, with rent growth down only marginally in Midwest and Northeast markets but significant drops in Sunbelt markets.
“The downward movement of rents seems likely to persist throughout 2023,” said Jay Lybik, National Director of Multifamily Analytics at CoStar Group. “High interest rates and the risk of recession are taking their toll, and many markets are experiencing unprecedented oversupply conditions.”
In addition to the data-driven analysis of the multifamily sector, the Auction Insights Report profiles how Sean Baird and Jonathan Holt, two Senior Vice Presidents with Colliers International, have utilized multifamily auctions on Ten-X to develop the National Student Housing Group within their firm with more than $90M sold in the past few years.
Ten-X is the world’s largest, online commercial real estate exchange. For over thirteen years, the Ten-X platform has empowered brokers, sellers and buyers with data-driven technology and comprehensive marketing tools to expand market visibility and decrease time to close. With Ten-X, brokers and sellers tap into a digital platform that makes it easy to onboard assets, evaluate the success of complimentary marketing campaigns in real-time and follow up on the strongest pre-qualified leads. Buyers are precision-matched with properties aligned with their investment goals, with unprecedented access to market analysis and due diligence documents to help them securely acquire properties online, with confidence.
About CoStar Group
CoStar Group (NASDAQ: CSGP), is a leading provider of online real estate marketplaces, information, and analytics in the property markets. Founded in 1987, CoStar conducts expansive, ongoing research to produce and maintain the largest and most comprehensive database of commercial real estate information. Our suite of online services enables clients to analyze, interpret and gain unmatched insight on commercial property values, market conditions and current availabilities. STR provides premium data benchmarking, analytics, and marketplace insights for the global hospitality industry. Ten-X provides a leading platform for conducting commercial real estate online auctions and negotiated bids. LoopNet is the most heavily trafficked commercial real estate marketplace online. Apartments.com, ApartmentFinder.com, ForRent.com, ApartmentHomeLiving.com, Westside Rentals, AFTER55.com, CorporateHousing.com, ForRentUniversity.com and Apartamentos.com form the premier online apartment resource for renters seeking great apartment homes and provide property managers and owners a proven platform for marketing their properties. Homesnap is an industry-leading online and mobile software platform that provides user-friendly applications to optimize residential real estate agent workflow and reinforce the agent-client relationship. Homes.com is the fastest growing online residential marketplace that connects agents, buyers, and sellers. BureauxLocaux is one of the largest specialized property portals for buying and leasing commercial real estate in France. Business Immo is France’s leading commercial real estate news service. CoStar Group’s websites attract tens of millions of unique monthly visitors. Headquartered in Washington, DC, CoStar Group maintains offices throughout the U.S., Europe, Canada, and Asia. From time to time, we plan to utilize our corporate website, CoStarGroup.com, as a channel of distribution for material company information. For more information, visit CoStarGroup.com.
This news release includes "forward-looking statements" including, without limitation, statements regarding CoStar's expectations or beliefs regarding the future. These statements are based upon current beliefs and are subject to many risks and uncertainties that could cause actual results to differ materially from these statements. The following factors, among others, could cause or contribute to such differences: the risk that new multifamily unit deliveries do not occur when expected, or at all; and the risk that multifamily vacancy rates are not as expected. More information about potential factors that could cause results to differ materially from those anticipated in the forward-looking statements include, but are not limited to, those stated in CoStar’s filings from time to time with the Securities and Exchange Commission, including in CoStar’s Annual Report on Form 10-K for the year ended December 31, 2022, which is filed with the SEC, including in the “Risk Factors” section of that filing, as well as CoStar’s other filings with the SEC available at the SEC’s website (www.sec.gov). All forward-looking statements are based on information available to CoStar on the date hereof, and CoStar assumes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.