Viewpoint – Multi multifamily

Categories: News Viewpoint

Providing an explanation of the term multifamily for those not familiar with the US real estate market, as it was a phrase that flummoxed me when I first heard it, multifamily refers to the rental of apartments and houses to individuals within the same complex, for example, an apartment block with shared amenities.

Explanation behind us, multifamily in the US is the most developed private rented residential market globally, with many countries, including the UK, trying to replicate it. With CBRE reporting nearly US$150 billion-worth of transactions in the last 12 months alone, it is no wonder that Islamic investors have participated. The sector suits Islamic investors well with Shariah compliant activity, familiarity with many of the investment locations across the US and the ability to leverage as part of a Shariah compliant structure.

We are aware of multi multifamily investment opportunities being considered by Islamic investors at the moment. QInvest recently announced their acquisitions in Charlotte, North Carolina and Denver, Colorado, both markets that our own 90 North is familiar with from a commercial real estate perspective, with dynamic local economies and growing populations.

A purchase into the multifamily sector is largely a purchase into the US economy, that is, as an operational asset with fairly short occupational lease contracts, its success relies on a healthy US economy and growth in jobs, both of which are doing well at the moment.

Not wishing to put a dampener on a market which delivered 3.8% rental growth last year according to JLL, but investors (Islamic or otherwise) need to keep an eye on the volume of new developments being completed. One of the joys of investing in the US market is the availability of data, which reveals that for the previous three years the number of newly finished residential units was below or within 10,000 units of net absorption (new lettings less expired lettings), but for 2016 completions exceeded net absorption by more than 40,000 units, with the first quarter of 2017 looking to be following a similar pattern.

Stating the obvious, the US is a large place, so national numbers and averages are always dangerous. From my experience, investors from the Middle East are rightly demanding a high level of due diligence from their local investment managers, so I hope and trust that only the most compelling opportunities are being pursued.

However, what is for sure is that this isn’t the last we’ve heard of US multifamily.

Original article appeared in Islamic Finance News.