In this episode of The Brinkman Report, host Kevin Brinkman welcomed Chris Nebenzahl, VP of Rental Research at John Burns Research & Consulting to talk about the multifamily rental market, focusing on current trends, challenges, and future opportunities.

The episode began by examining the supply and demand dynamics within the multifamily sector. It was noted that the market is currently in a transitional phase, likened to being in the sixth or seventh inning of a baseball game. While peak deliveries have passed, significant supply is still coming online, particularly in the Sun Belt region, which includes markets like Austin and Raleigh. However, a pullback in new supply is beginning to occur, which is seen as a positive development given the recent softening of market fundamentals.

Key statistics highlighted during the discussion included approximately 600,000 units delivered last year, with around 500,000 units absorbed. A healthy year for multifamily supply typically ranges from 300,000 to 450,000 units. The current oversupply is starting to balance out as demand remains strong, driven by a robust labor market.

The impact of rising interest rates on new construction was also a significant topic. The increase in rates has led to a notable decline in housing starts, prompting many developers to adopt conservative underwriting practices. This often results in projections of minimal rent growth. However, there is optimism that by 2026 and 2027, the market may see a return to more robust rent growth as the current supply wave subsides.

The cap rate environment was another focal point, with challenges in underwriting cap rate compression being discussed. It was suggested that investment hold periods may need to extend beyond the traditional three to five years, as investors seek stability and potential growth in the future.

Specific markets were analyzed, including Denver, Salt Lake City, and Boise. Denver is experiencing some oversupply but is still well-positioned for long-term growth due to its diverse economy and strong institutional interest. Salt Lake City is seen as lagging behind Denver, while Boise has shown surprising resilience in the face of new supply, with strong demand and appeal contributing to its market stability.

The episode concluded with a broader discussion on the housing supply issue in the U.S., revealing that the country is currently about 1.2 million housing units undersupplied. This undersupply is particularly pronounced in the rental market, where the cost of homeownership has become a significant barrier for many, further driving demand for rental units.

Overall, this episode provided a comprehensive overview of the multifamily rental market, offering valuable insights into current trends, challenges, and future opportunities for investors and stakeholders in the sector.

About Our Guest:

Chris Nebenzahl, Vice President, Rental Research
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Chris leads the John Burns Research and Consulting rental research team focusing on multifamily and Build-to-Rent verticals. He has been active in the rental industry for over ten years as a researcher, data analyst, speaker, and investor. Prior to John Burns Research and Consulting, he led the research department at Radix, a multifamily data startup and the institutional research team at Yardi Matrix. He has also worked as a fixed income portfolio manager at Bank of New York Mellon. Chris holds a B.A. in economics and a MSF in finance, both from the University of Denver.