Global Uncertainties Add to Multifamily’s Investment Appeal

The apartment sector’s advantages include stability, flexibility and diversification.

Global financial markets are reeling from the drastic steps governments are taking to fight the novel coronavirus COVID-19 pandemic. During the week of March 9, dramatic drops in the Dow Jones Industrial Average signaled the arrival of a bear market for U.S. equities, and European and Asian stocks have also taken a beating.

In the face of uncertainty, individual and institutional investors are taking a closer look at commercial real estate, with a particular interest in the multifamily sector. Unlike office, industrial, retail and hospitality properties that are directly affected by an economic downturn, multifamily tends to be a more stable asset class.

Because a multifamily property has larger base of tenants than an office or industrial building, an extra vacancy or two has relatively little impact on the overall rent roll or continuing income stream. Also, apartment leases are relatively short term, giving owners the flexibility to adjust rental rates up or down based on economic conditions.

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