Inside the Crystal Ball: Multifamily Predictions for 2021

Updated: Jan 9

Well, if you’ve been following my blog so far, you already know what I am about to tell you: there is no crystal ball when it comes to investing, especially real estate investing. When it comes to peering inside a crystal ball seeking predictions on how multifamily properties will perform in 2021, it’s mostly wishful thinking. However, there are other ways to gain a perspective on the way multifamily properties will fare in the coming year, including trends, market analytics, and experience.

While COVID is still raging across the country, the positive news is that a vaccine is now rolling out, helping to mitigate the devastation to our health and our economy. We’re still a long way from quashing the pandemic, with some predictions stating that “normalcy” won’t return to our country until late 2021 or mid-2022.

With a potential duration of eighteen months before the country stabilizes, there is a lot of speculation among high-net-worth individuals, seasoned investors, and family offices as to timing of multifamily investments. Observing and analyzing how the market and our properties perform since the onset of COVID, I’d like to suggest some predictions for 2021 that real estate investors might find helpful.

Prediction #1: Suburbs will Continue to Thrive

During the pandemic there was a flight to the suburbs by many city dwellers, and they took flight for several reasons. The main reason was to get away from highly dense areas in large cities such as Ney York City, San Francisco, and Los Angeles, as well as main cities in secondary markets such as Atlanta and Dallas. Interestingly enough, I’ve witnessed this trend taking place way before COVID started. The reason? Cost of living. It was a lot less expensive to live in the suburbs than in the city’s core; people found that they got a lot more for their money in suburban multifamily properties.

For example, a $1,500 one-bedroom unit in the city turned into a two- or three-bedroom unit in the suburbs, providing tenants with additional amenities as well. With all that the suburban properties have to offer, it’s going to be hard to get people to give that up and move back to the city in the near future.

Other factors contributing to increased suburban rental increases include working from home, which eliminates the need to live in a city’s core area near offices, a reluctance to use mass transit, and a desire for less dense living environments. Many companies have indicated that the trend of working from home will continue in 2021.

Because the pandemic has devastated many businesses and retail stores, it could take from 1- to 2 years before the city’s attractions, restaurants, and stores will draw residents back. Once they go back, they might find many of their favorite eating and shopping spots are gone. The vibe that brought people to the city will take time to rebuild, and during that time the rental markets in the suburbs, particularly in the secondary and tertiary markets like Dallas, Atlanta, and North and South Carolina will remain on fire.

Prediction #2: Demand for Multifamily Properties Will Continue in Full Force

During the pandemi