Lenders Enter 2020 Willing to Fund New Apartment Construction

Lower interest rates are helping offset rising labor and materials costs and helping sustain apartment construction levels.

As fears of a possible recession and overbuilding in the multifamily sector diminish, lenders are showing they still have an appetite for financing construction projects. The availability of mezzanine loans and lower interest rates are helping fuel this activity and helping to offset rising construction costs.

Even if the economy shrinks sometime in 2020 or 2021, multifamily pros believe demand for apartments is still strong enough to prevent major damage to apartment properties in most markets—even with the thousands of new apartments recently opened by developers across the country. “There is clear evidence that multifamily is the asset class best equipped to weather a downturn,” says David G. Shillington, president of Marcus & Millichap Capital Corp., based in Atlanta, pointing to overall fundamentals in the sector that remain healthy.

“Occupancy rates continue to stay steady in the face of new supply,” adds Bill Leffler, senior vice president of equity and structured finance for CBRE, based in based Atlanta. “The strong economic conditions, job creation and population increases (in the southeast) still fill up the new product hitting the market.”

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