The Northwest Region’s multifamily market fundamentals exhibited significant softening throughout the second half of 2022.
The Northwest Region’s multifamily market fundamentals exhibited significant softening throughout the second half of 2022. Sales activity similarly began to taper off at the end of 2022, however, pricing held up and buyer demand remains strong. 2023 will be a year of normalization for both rent growth and cap rates as new supply comes online and higher interest rates continue to disrupt in the capital markets.
Commercial real estate sales activity fell off a cliff in the final quarter of 2022 across the U.S. Rising borrowing costs and mismatched expectations between buyers and sellers in the multifamily sector have combined to depress sales volume. In addition, cooling multifamily market fundamentals – falling occupancies and rents in particular – have impacted the previously red-hot multifamily sector. Overall U.S. multifamily sales volume declined 17 percent in 2022 compared to the record-setting 2021. Pricing, while up 1.8 percent year-over-year nationally, began to fall in the fourth quarter of 2022. December 2022’s U.S. multifamily sales volume of $14.1 billion was a staggering 84 percent drop compared to December 2021. Nevertheless, multifamily overtook industrial as the top asset choice in the Americas, according to Colliers’ 2023 Global Investor Outlook Report.
In the sixth edition of this biannual regional market report, we will provide in-depth multifamily statistics and commentary on the 10 markets in the Northwest Region of the U.S., including the San Francisco Bay Area, California’s Central Valley, Northern Nevada, Portland, and Seattle/Puget Sound, which has a combined population of approximately 18.5 million people. The nine-county Bay Area is broken out into five markets: San Francisco, San Francisco Peninsula, Silicon Valley, East Bay, and North Bay. The Central Valley includes the Stockton/Modesto and Sacramento markets. Northern Nevada consists of the Reno market (Washoe County). Finally, the Pacific Northwest subregion is comprised of Portland, Oregon, and Seattle/Puget Sound. We will compare market trends through the end of 2022 and provide a clear-eyed perspective on each of these markets. Multifamily market statistics and property sales data were pulled from sources we deem reliable. Statistical trends on effective rents, occupancy, demand/absorption, supply, construction, sales pricing, sales volume, cap rates, employment, and population are highlighted at both a regional and market level.
Analyzing current market conditions, this report aims to assist landlords, investors, developers, analysts, appraisers, and brokers in making intelligent decisions in a competitive and evolving marketplace. This regional market report summarizes statistics on more than 1.6 million market-rate apartment units across the Northwest Region to provide an objective and actionable outlook for readers. If you have any additional questions on any of the content in this report or would like to connect with a multifamily broker in any of these markets, please contact one of our leadership or research contacts listed at the end of the report.
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