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Defensive characteristics support multifamily sector

Global Market Perspective, May 2020

Since 2010, global investment in the multifamily sector has grown at a compound annual growth rate of 15.6%, putting it among the fastest-growing asset classes. Investors have flocked to the sector thanks to its mainly defensive qualities as well as the demographic and secular trends which have underpinned demand.

In the most liquid and deep multifamily investment market in the world, the U.S., the sector has overtaken offices to become the most active asset class in terms of volume with multifamily representing 34.5% of total real estate investment in the first quarter. In EMEA, multifamily is currently real estate’s second most liquid sector, behind offices. The region’s most mature multifamily market, Germany, continues to account for a significant proportion of investment; however, early-stage markets are also seeing budding investor interest. Meanwhile across Asia Pacific, residential market transactions in the first quarter softened in line with the COVID-19 outbreak and restrictions on movement. The effect on pricing appears modest and may prove relatively temporary, subject to the pace and trajectory of the economic recovery.

A longer-term perspective: resiliency

Multifamily product is often desired due to its resilient characteristics. Markets with diversified economies, noteworthy tech and innovation sectors and/or affordable costs of living are already showing signs of that resiliency in the U.S. If such trends persist, those cities will be poised to benefit from elevated investor interest for the foreseeable future.