A quickly rising U.S. economy has attracted the attention of foreign investors looking to capitalize on safe investments that yield continuous cash flow. At one time, that meant investment in top commercial real estate trophies like offices and retail spaces.
Foreign investors are shifting their focus on a new investment strategy: the multifamily housing market.
When foreign investments pour into multifamily housing markets, their activity jolts the building industry into action. Previously, foreign investors capitalized on commercial properties. When quarantining in place forced much of the workforce to work remotely, commercial real estate became less attractive.
Now investment pours into multifamily housing markets. “Over the next three to five years, 86% of foreign investors are planning to increase their positions in multifamily, now the most favored property type, according to the 2021 Association of Foreign Investors in Real Estate (AFIRE).
What to expect when an investment pours into multifamily housing market
Many multifamily housing development owners are hesitant to sell their properties in the current market because the leased units are generating income. The lack of availability has pushed foreign investors into building developments from the ground up.
As a result, look for these constructions trends:
- A departure from urban investments; well-developed cities have lost their appeal.
- Suburban developments are rising, thanks to an exodus from major metro areas.
- Targeting the South and Southwest for their enormous growth potential.
- Garden-style apartments are especially attractive because of their ROI.
- A preference for surface parking over structured parking.
These trends indicate that it may be time to take a second look at building specific niche properties in real estate: multifamily housing units and student housing.
The urgency behind foreign investments
The U.S. economy has recovered more quickly than most other countries, soaring apartment building prices. At the same time, bonds have languished in a global low-rate environment. According to Yardi Matrix, this has driven “an extremely high amount of interest expressed by non-U.S. sources in multifamily, driven by several factors,” according to Yardi Matrix. International investors, especially from Canada and Germany, are keen to purchase and develop these properties.
Average rents have grown by nearly 15% in one year, and projections indicate that the growth is likely to continue. You can expect that the urgency in building multifamily housing units will also affect your construction business.
They were gauging when and how much to invest depends on several external factors, including inflation, steadily increasing interest rates and unpredictable inflation. Construction firms are poised to expand their workforce to meet demand, but they should also be cautious about overstaffing.
To help you temper the excitement about potential growth with a worry about hiring the staff you need in uncertain times, reach out to your recruiter for timely help identifying talent and getting them onboarded.
About The Author.
Jeff Raymond (email@example.com), President and Founder of Raymond Search Group (RaymondSearchGroup.com), is an industry-leading recruiter specializing in Construction and Real Estate, Engineering, Architecture, HVACR/R, Building Automation Systems, MEPF, and Manufacturing. Jeff is known for delivering the top 5% of industry talent to his clients with unrivaled efficiency and network. Clients and candidates alike rely on Jeff as a trusted advisor through his recruiting expertise and industry insight.
Jeff earned his Bachelor of Science degree in Business Administration, Management, and Operations from the University of Massachusetts Lowell. He is experienced in the construction industry and is Procore certified in multiple areas. He is an active member of the Urban Land Institute, ASHRAE, the Institute of Refrigeration (IOR), and The OSHA Education Center Association.