Insights

The Resilience of Class B Multifamily Housing

Los Angeles, California | February 21, 2019

During lunch recently, an investment banker friend asked, "How will our Class B Multifamily real estate investments hold up to the threat of higher interest rates and/or a pending recession?" The answer dramatizes the exceptional resilience of Class B multifamily housing:

• The asset class has demonstrated persistent demand throughout the economic cycle. During strong economies and the deepest recessions, Class B multifamily occupancy rates have ranged from a high of 98% to a low of 90% in all markets across the country—a record unmatched by other real estate assets such as Class A multifamily, office or retail.


• It is predicted that the U.S. will need 4.5 million new apartments between now and the year 2030. It also is expected that at our current rate we will only supply 2.5 million apartments, leaving undersupply of 2 million units.


• Recent Goldman Sachs research shows that while a high-end supply glut is exerting downward pressure on the overall market, vacancy rates in the aggregate nonetheless remain low and falling.


• Diverse demographic and economic trends―rising interest rates, retirees attracted to the ease of apartment living and millennials unable to buy a home in the current market―have combined to create what the Urban Land Institute has called "a firehose of fundamental demand for rental apartments, which only shows signs of strengthening."

All these factors contribute to mitigate risk in Class B multifamily. At Aii, we mitigate risk further through diverse strategies to generate alpha at the property level. We perform exhaustive research on the competitive advantages of each property, adhere to well-defined acquisition criteria and transform each property across multiple dimensions.

Michael Chesser, Founder and President
Apartment Income Investors, Inc.
Transforming Homes, Lives and Communities

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Sources

• Our Vision for 2030, Urban Land Institute and PricewaterhouseCoopers, June 2017.
• The Case for Workforce Housing, CBRE, November 2018.
• Tale of Two Markets: High-End Apartment Supply and the Inflation Outlook, Goldman Sachs, September 2018.

Related sources can be found in the RESEARCH section of Aii's website.

About Apartment Income Investors
Founded in 1994, Apartment Income Investors (Aii) has a proven track record of buying underperforming Class B multifamily and commercial properties and implementing renovation and repositioning strategies to improve operations and substantially increase the value of each property. This strategy has proven successful through several real estate cycles with above-average returns to investors. The company's goal is to transform homes, lives and communities while delivering superior investment returns.

For more information, please visit www.aiiproperties.com or contact Michael Chesser at 805.604.2644 | mchesser@aiiproperties.com.

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