US Apartment Investment Continues to Drop in Q1

RealPage, a provider of property management software, data analytics, and services to manage rental properties and real estate, reported on Wednesday that investment in US apartments continued to decline in Q1. The contraction is a result of the high cost of borrowing and economic uncertainty, RealPage said.

Although the asset class remains an appealing commercial real estate investment, sales have declined well below pre-pandemic levels. According to MSCI Real Capital Analytics, nearly 1,040 apartment properties changed hands at a value of $20.6 billion in Q1.

In addition, the overall sales volume during the quarter was down 25% when compared to 2023Q1, while the number of properties trading hands was down 26% during the same period. This was well below the 2021Q4 peak, when around 5,400 properties changed hands for more than $166 billion as the result of pent-up demand following the onset of the pandemic.

The average price per unit, while above pre-pandemic levels, has also continued to fall, registering at $190,184 in Q1—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 Q1 were up 50 basis points year-over-year, averaging 5.7%. That was the highest cap rate in nearly eight years. Still, multifamily cap rates during Q1 remained the lowest among major property types.