MISSISSAUGA, ON, Nov. 15, 2022 /CNW/ - Morguard Corporation ("Morguard") (TSX: MRC) today released its 2022 U.S. Economic Outlook and Multi-Suite Residential Rental Market Fundamentals Mid-Year Update, providing a detailed analysis of the 2022 U.S. real estate market and trends to watch for in the first half of 2022 and beyond. The mid-year update revealed that the multi-suite residential rental sector strongly rebounded from the pandemic-induced slowdown. Demand surged during 2021 and the first half of 2022 fueling record-high rent growth, decade-low vacancy, and a sharp increase in construction activity in many of the country's largest metros. Over the near term, the sector will settle into a more moderate recovery pace with demand remaining stable and healthy.
"Recovery from the pandemic has been swift and unparalleled for the multi-suite residential rental sector," said Keith Reading, Director, Research at Morguard. "Investors looked to capitalize on the sector's recovery and high rent growth as national investment sales reached record highs. Looking forward, investors will continue to be interested in the sector and anticipate attractive returns."
Multi-Suite Residential Rental Real Estate
The U.S. multi-suite residential rental demand surged to a record high during 2021, a trend that carried over into early 2022. As a result, vacancy fell to a decade-low in many markets as renters found available options increasingly scarce. Rents increased and experienced double-digit growth in some regions. Property values climbed to a record high and cap rates to a record low, driven by outsized demand. Subsequently, construction activity spiked with decade-high completions and starts reported in several markets.
The U.S. multi-suite residential rental market outlook is generally positive. Rental demand will remain moderately healthy despite coming down from the unsustainable levels of 2021 and early 2022. Investor confidence in the U.S. multi-suite residential rental sector will be sustained over the near term.
Economic growth began to slow down in the first half of 2022 following a period of robust expansion and recovery from the pandemic-influenced retreat of 2020. Domestic demand softened by the mid-year mark of 2022 and recession fears increased as economic activity levels slowed.
Higher interest rates, inflation, geopolitical issues, and supply chain challenges will continue to slow economic growth through the rest of 2022 and into 2023. Hiring activity is projected to moderate over the second half of 2022, as businesses contend with rising costs, reduced domestic demand and lower profits. U.S. consumer spending growth and housing market activity will also moderate over the next few years.
Washington-Arlington Alexandria (WAA)
The Washington region's economic growth rate will moderate over the next few years, following a period of robust expansion during 2021 and the first half of 2022. Economic output is expected to increase by a stronger 2.7 per cent in 2022, having expanded by a robust 3.8 per cent over the previous year. The WAA multi-suite residential rental market outlook is currently stable and healthy and demand fundamentals will remain this way, having ranged at a record-high level during 2021 and early 2022.
Raleigh Metropolitan Statistical Area (MSA)
In keeping with the pre-pandemic trend, the Raleigh MSA economy is projected to outperform over the next few years. Regional economic output is projected to increase by an above average 3.4 per cent this year with growth translating into healthy job market conditions. The growth phase of Raleigh's multi-suite residential sector cycle will persist over the near term with rental demand fundamentals remaining strong.
Atlanta-Sandy Spring-Roswell Metropolitan Statistical Area (ASSR MSA)
Above-average economic growth is forecasted for the ASSR MSA over the next few years with GDP projected to increase by an annual average of 2.6 per cent between 2022 and 2026. The region's labour market will strengthen over the next few years, driven by above-average economic growth. The region's multi-suite residential rental market recovery is expected to moderate over the near term, following a sharp increase in construction activity that began in late 2021 into the first half of 2022.
Palm Beach Metropolitan Statistical Area (PB MSA)
The Palm Beach MSA's economic growth trend will gear down over the near term, following a period of robust expansion that continued into the first half of 2022. GDP is forecast to rise by a relatively modest 1.6 per cent in 2023 after a 3.3 per cent lift this year. The region's labour market will moderate following a period of strong job creation activity in 2021 and early 2022. Multi-suite residential rental sector supply will increase significantly over the near term following the modest additions to inventory in the recent past.
Chicago-Naperville Elgin Metropolitan Statistical Area (CNE MSA)
A relatively slow recovery is forecast for the CNE MSA's economy with GDP expanding by a modest 2.6 per cent in 2022. Annual growth of 1.9 per cent is forecast between 2022 and 2026. The real estate sector is expected to be one of the region's economic growth leaders. The CNE MSA's multi-suite residential rental market outlook is relatively stable, and the recovery phase of the sector cycle will extend over the near term largely due to the market's healthy rental demand fundamentals.
New Orleans-Metairie Metropolitan Statistical Area (NOM MSA)
The NOM MSA economic growth trend will slow in 2023 following a period of uneven performance. Growth will range between an annual average of 1.2 per cent and 1.4 per cent between 2023 and 2025. Labour market gains will slow by 2024, following two years of stronger performance. The NOM MSA's near-term multi-suite residential rental market outlook is mixed, however, the rental sector supply fundamentals will gradually strengthen over the medium term.
Dallas-Fort Worth-Arlington Metropolitan Statistical Area (DFWA MSA)
The Dallas-Fort Worth-Arlington economy will outperform over the medium term as the annual growth average reaches 2.7 per cent, 50 bps higher than the national rate. Labour market conditions will also strengthen, driven by the region's economic outperformance and diversity. Strong rental market performance is forecast for the DFWA's multi-suite residential property sector over the near term. Rental demand will remain robust, driven by job growth and continued in-migration.
Denver-Aurora-Lakewood Metropolitan Statistical Area (DAL MSA)
A strong economic growth trend is forecast for the DAL MSA through the midway mark of the current decade. Economic output will rise by an annual average of 2.8 per cent between 2022 and 2026, 60 bps higher than the national growth rate. Similarly, the region's labour market will outperform over the medium term. Healthy rental market fundamentals are forecast for the region's multi-suite residential sector over the near term despite a surge in new supply.
Los Angeles-Long Beach-Anaheim Metropolitan Statistical Area (LALBA MSA)
The LALBA MSA's economic growth outlook is generally stable and healthy. Higher-than-average job growth is forecast for the region over the medium term after a somewhat disappointing initial recovery from the pandemic-driven decline. Conditions in the LALBA multi-suite residential rental market will remain tight over the near-to-medium term as vacancy is projected to range between 3.4 and 3.7 per cent over the remainder of 2022 and the next few years.
The 2022 U.S. Economic Outlook and Multi-Suite Residential Rental Market Fundamentals Report is a detailed analysis of the 2022 real estate investment trends to watch in the United States. The full report, including an analysis of the real estate markets in Washington, Raleigh, Atlanta, Palm Beach, Chicago, New Orleans, Dallas, Denver and Los Angeles is available at morguard.com/research.
Morguard Corporation is a major North American real estate and property management company. It has extensive retail, office, industrial, hotel and residential holdings owned directly and through its investment in Morguard Real Estate Investment Trust and Morguard North American Residential REIT. Morguard also provides real estate management services to institutional and other investors. Morguard's owned and managed portfolio of assets is valued at $19.4 billion. Please visit www.morguard.com or follow us on LinkedIn.
SOURCE Morguard Corporation
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