Multifamily 101

January 29, 2024

With NMHC in San Diego this week, we thought it would be fun to share some of the criteria we consider when evaluating multi-family markets and investments. We are very bullish on multifamily going into 2024. As investors (both on the GP and LP side), we have the following criteria:

1. Sponsor: Like any investment, we invest first and foremost in people. Does the sponsor have expertise acquiring and operating multifamily properties in this market?

2. Potential for rent growth: For this, we look at a gap between rent growth and wage growth. When we see wage growth outpacing rent growth, we predict strong rental growth in the coming years. Below is a chart that our team looked at when evaluating our multifamily development project in Santa Clara. We see a definite gap that we anticipate to close in the next few years. Santa Clara is home to 3 of the top 10 semiconductor companies (by market cap) and adjacent to Apple headquarters in Cupertino. The semiconductor companies are back in the office and Apple has a strict in-office policy from Tuesdays to Thursdays. So for us, seeing this chart was very encouraging.

3. Affordability of Single Family Homes: The longer people have to wait and save to afford the home, the longer they will rent. This is a metric we look at for all of our projects. In the case of Silicon Valley and Santa Clara, JLL estimates that only 39% of workers can afford a single family home, thus pushing more than half the market into renting. We like those market dynamics.

4. Jobs: we always favor infill markets with strong job bases.

We hope this was an insightful look into how we think about multifamily investments. Thank you to Katherine Zeller and Ryan Wagner at JLL for always keeping our team up to date on the market.