Multifamily landlords in high-growth areas may soon experience some relief.
Willy Walker, Chairman and CEO of Walker & Dunlop, who is set to speak at GlobeSt.’s multifamily panel on April 1 in New York City, believes that the overwhelming supply influx in the sector may have reached its peak.
“Many are evaluating the market and recognizing that the pipeline for new supply will shrink significantly by 2026 and 2027, prompting expectations of rent growth,” Walker told GlobeSt.
“This marks a notable shift in market sentiment over the past few months.”
Supporting this perspective, the National Association of Home Builders reported that new housing starts dropped 25% last year and are projected to decline another 11% in 2025.
Signs of Recovery in Large Portfolio Transactions
The market for large multifamily portfolio transactions was largely stagnant in 2023 and 2024. While activity has yet to rebound, Walker noted an increase in discussions about potential larger deals. Additionally, he observed that the new Trump administration has yet to make a significant impact on the multifamily sector.
Strong Growth in Red States
As is common in commercial real estate, investors continue to be drawn to regions with favorable demographic trends. For the multifamily sector, job growth is a key factor, and much of this growth is concentrated in traditionally red states like Texas, Florida, and the Carolinas.
Walker identified Miami, Charlotte, Dallas, Houston, and Nashville as top employment growth areas.
“Investors are seeking job growth, and it’s evident that these markets are leading the way,” he said.
In contrast, cities like Baltimore, Boston, and San Francisco have struggled to return to pre-pandemic employment levels.
Despite supply challenges in high-growth areas, many commercial real estate firms are still making long-term investments in these regions.
Walker & Dunlop Expands Investment Activity
Despite potential uncertainties surrounding tariffs and other economic policies under the Trump administration, Walker & Dunlop remains active in its investment strategy.
Recent initiatives include expanding its affordable housing team with former Wells Fargo employees, opening a London office, launching an investment sales team in Phoenix, and introducing a hospitality investment sales division.
Upcoming Loan Maturities May Drive More Transactions
While W&D is focused on long-term strategies, Walker anticipates that the need for refinancing will spur deal activity. He pointed out that a substantial amount of debt will require refinancing in the next few years.
Trepp predicts that CMBS loan maturities will average around $150.9 billion in 2025, potentially driving issuance growth.
Walker also suggested that investors may begin to accept the current interest rate environment. With the Federal Funds rate holding steady between 4% and 5%, lower rates of 2%-3% may be a thing of the past.
Despite these financial conditions, Walker & Dunlop remains optimistic about its long-term position, particularly in multifamily real estate.
“Multifamily has been the fastest-growing commercial real estate asset class for the past 20 years,” Walker noted. “All indicators suggest it will continue to dominate, and we are well-positioned for the future.”
Source: GlobeSt.