Annual report helps investors navigate the private real estate market and provides MLG's outlook on opportunities and challenges facing the industry
BROOKFIELD, WI / ACCESSWIRE / September 24, 2024 / MLG Capital - a national leader in private real estate investments - today announced the release of its annual "2024 Market View," a robust report featuring the firm's insights on the multifamily, industrial, retail and office sectors, along with current trends in capital markets. The market view provides an inside look for investors on the state of the private real estate market, including where opportunities may exist and calling out important trends.
The following is a summary of key findings in select sectors, and the full report can be viewed and downloaded here.
Multifamily sector offers long-term stability amid short-term supply wave
According to MLG, the multifamily sector continues to demonstrate resilience, even as broader economic challenges persist. The ongoing appeal of multifamily investments is supported through the following:
Sustained Demand: Continued population and household formation growth combined with increasing unaffordability of single-family homes is pushing more people into renting. Further, many individuals are renting for longer as marriage and children are pushed out to later ages, bolstering the multifamily market.
Short-Term Supply Headwinds, Near- and Long-Term Tailwinds: The multifamily market is enduring all-time highs in new deliveries that are expected to peak in 2024. However, with higher construction costs and interest rates, new multifamily starts have fallen rapidly, signaling a significant future reduction in new deliveries. Looking to 2025 and beyond, new apartment deliveries are expected to be below the last decade's average number of deliveries.
Rent Growth: While rent growth has moderated from the unprecedented levels seen during the years surrounding the COVID pandemic, many markets continue to see positive rent growth today. With new supply tailing off significantly in 2025 and beyond, MLG anticipates sustained positive rent growth in the near future as demand outweighs new supply.
Stabilizing Occupancy: MLG expects occupancies to stabilize in 2025 and beyond, closer to long-term averages when the short-term supply is absorbed and the supply/demand dynamic shifts due to the reduced forecasted future pipeline for new construction.
With these factors in mind, MLG sees strong continued investment opportunity in the multifamily sector. According to Tim Wallen, Principal and CEO, the market has seen a significant reduction in transactions and equity flows into all real estate sectors, including multifamily. Given the lower level of competition on the buy side today, MLG has a heightened focus on acquiring quality assets in quality locations.
"This is a unique window of time for investment before the market gains more certainty of interest rates and institutional investors re-enter the marketplace," said Wallen. "Given the current market conditions, we find a unique market environment where assets can be acquired at higher cap rates, at depressed net operating incomes and at deeper discounts to replacement cost. The culmination of these factors creates an opportunistic time to invest capital."
Industrial sector continues to perform well
MLG notes that the industrial sector continues to perform well, driven by strong demand for logistics and warehouse space. Notable insights include:
E-commerce Growth: The ongoing growth of e-commerce has been a significant driver of demand for industrial space. With the pandemic permanently shifting consumer behavior toward online shopping, retailers and third-party logistics providers are seeking more warehouse and distribution space to meet demands.
Supply Chain Reshoring: Many companies are rethinking their supply chain strategies in response to global disruptions. There is a growing trend of reshoring manufacturing and increasing domestic inventory levels, both of which require additional industrial space.
Increased New Deliveries: The strong demand for industrial space has led to low vacancy rates across most markets; however, there has been a substantial delivery of new supply. Investors need to be careful of oversaturated markets.
According to Wallen, understanding the importance of location in industrial investments is a requirement. Properties located near major transportation hubs, such as ports, airports, and interstate highways, are particularly desirable. These locations are critical for efficient distribution and supply chain operations, making them valuable assets in the industrial market.
"Industrial assets are very investable, but it can be a challenge to find deals at an attractive basis relative to replacement cost," said Wallen. "MLG's smart deal strategy for this sector targets finding existing multi-tenant industrial with rents below new construction rents or deals in mature sub-markets with low risk of supply creation."
Capital markets presenta time for strategic buying
The current capital market environment presents both challenges and opportunities for real estate investors as a few key factors are at play:
Equity Availability: Despite recent market volatility, there remains a substantial amount of equity available for real estate investment. There is ample capital available in the market, but it is being deployed more cautiously.
Healthy Debt Market: The lending environment remains favorable, particularly for multifamily and industrial investments, although traditional lenders are demanding more substantial down payments and stricter underwriting standards.
Credit Spreads and Interest Rates: The rapid increase in interest rates over the past 18 months has kept credit spreads wider than usual. However, as interest rates stabilize, these spreads are expected to narrow, which could create more favorable conditions for borrowers.
Overall, Wallen, who has stated that he's experienced virtually every type of real estate environment over his nearly four-decade career, says it is essential to find deals in all cycles.
"Many investors may be sitting on the sidelines due to uncertainty, making it an opportune time to acquire assets at attractive prices," said Wallen. "At MLG, we find opportunities in all cycles, focusing on assets with strong fundamentals that can weather short-term volatility and deliver long-term value."
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About MLG Capital
MLG Capital is a sponsor of private real estate funds targeting investment from investment advisors, family offices, and accredited individuals. For more information about MLG Capital and its investments, visit the firm's newsroom.
This release does not constitute an offer to sell an investment in a security. Offers to sell an investment in a security can only be made to a qualified purchaser by delivery of a Confidential Private Placement Memorandum (the "Memorandum"), any supplements to the Memorandum and accompanied by a Subscription Document Booklet. The information contained in this release may be preliminary in nature and may have not been independently verified by MLG Capital or its affiliates. The recipient of this release should consult with its own investment, tax and/or legal professionals about the merits of the investment. MLG Capital does not make any representation or warranty as to the accuracy or completeness of any information presented in this release. Any financial information or projections may be initial estimates and may be subject to change without notice to recipient. An investment into a private offering is subject to various risks, none of which are described herein. All figures as of 6/30/2024. Value consists of disposed of assets as well as the current internal valuation of currently held assets as of 6/30/2024. Values may not have been reviewed by an independent 3rd party and may be internal projections.
For more information, contact:
Katie Whitlock, Public Relations
Laughlin Constable
kwhitlock@laughlin.com
414-305-5927
SOURCE: MLG Capital
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