What’s Next for Multifamily? Key Trends to Watch as 2024 Unfolds

Emerging Trends in Multifamily Development and Investment to Keep on Your Watchlist

As we move into the latter half of the year, the multifamily industry is experiencing a range of trends that are set to influence the market. While challenges such as rising construction costs, higher interest rates, and an influx of new supply are present, there are also unique opportunities for multifamily investors, developers, and property managers to navigate this evolving landscape. 

Here’s a look at the top 10 trends shaping the multifamily market in the second half of 2024.

1. A Defensive Approach to Market Conditions

With the expectation of interest rate cuts bolstering the market later on, much of the current activity is centered around managing distressed properties and loans coming due. The near-term focus is on defensive strategies, such as securing short-term bridge financing to navigate the current economic environment.

Multifamily transaction activity will remain subdued through the end of 2024 and into early 2025. Multifamily investors are advised to prepare for a gradual increase in market velocity, particularly as rate cuts begin to take effect.

2. Smaller Amenity Spaces, Bigger Impact

As developers focus on maximizing unit counts, there’s a noticeable trend towards reducing the footprint of common amenity spaces. But smaller doesn’t mean less significant. Developers are getting creative with their space, integrating indoor and outdoor areas to create versatile “three-season spaces” that can be used year-round. These spaces might include covered porches, trellised zones, or areas seamlessly blending with adjacent indoor amenities.

Moreover, the growing emphasis on wellness has led to the incorporation of high-end amenities such as spa services, saunas, cold plunge pools, and unique fitness options. For example, yoga studios, indoor cycling rooms, and virtual fitness options. Despite the reduced square footage, the focus is on delivering quality over quantity, ensuring that these spaces offer meaningful experiences for residents. 

Multifamily professionals know that the real value in a property lies in offering amenities that not only appeal to potential renters but also align with their evolving expectations and lifestyle needs. Surprisingly, only 15% of multifamily professionals track the usage of their apartment amenities, according to Multifamily Insiders. This gap represents a missed opportunity to tailor offerings that resonate with residents and maximize property value.

Today’s renters are increasingly looking for more than just a place to live — they want a lifestyle that suits their needs and preferences. For example, residents may be willing to commute a bit farther if it means having access to unique amenities like a rooftop lounge, a pet spa, or additional green space. Multifamily professionals have noted that residents are particularly “wowed” by more unconventional offerings such as blow-out hair bars, package lockers, beverage stations, and even crystal lagoons.

3. Location and Amenities as Key Investment Drivers

Suburban and garden-style apartment communities, particularly those in top-rated school districts, remain highly attractive to investors. These areas offer strong barriers to new supply, supporting resident retention and allowing for above-market rent growth. Investors are increasingly drawn to properties that combine desirable locations with robust local amenities, as these factors create a competitive edge and long-term value.

This trend is reflected in investment strategies focusing on mature, infill locations where higher resident retention and limited competition from new developments are key benefits.

4. Anticipated Uptick in Transaction Volume

While the multifamily market has seen some volatility, there’s cautious optimism that transaction volumes will pick up in the latter half of the year. Factors such as price normalization and potential interest rate cuts by the Federal Reserve could drive this increase. Additionally, a decrease in labor costs might spur an uptick in construction projects.

However, investors need to remain vigilant. Debt funds still heavily influence the market, especially for non-stabilized assets. While capital is waiting on the sidelines for potential distress situations, the extent of market distress remains uncertain. Investors should watch cap rate stabilization and transaction yields, which could signal a more favorable buying environment.

5. A Less Crowded Investment Landscape

The current market conditions have led to a pullback from traditional investors, creating a less crowded space for those willing to take calculated risks. This environment presents a unique opportunity for well-capitalized buyers who can access debt and have cash reserves to acquire institutional-quality assets at prices well below replacement costs.

For investors with the resources to navigate these challenges, the second half of 2024 could offer some of the best buying opportunities since the post-Great Financial Crisis era.

6. Oversupply Concerns in Boom Markets

In markets where development has been particularly active, there’s a growing concern about an oversupply of new units. As peak deliveries approach in several markets, competition among properties in lease-up phases is expected to intensify, especially during the slower fall and winter months.

While the long-term outlook remains positive, with supply expected to stabilize, the near-term could present challenges for multifamily investors and developers as they navigate this period of heightened competition.

7. Aging Demographics Driving Senior Housing Consolidations

With an increasing number of seniors entering the 80+ age bracket, a significant shift is occurring in the senior housing market. New construction in this sector has slowed, but the demand driven by aging demographics leads to more robust operating fundamentals and higher occupancy rates.

This trend is attracting heightened investor interest in senior housing at the property and platform levels. As the sector continues to consolidate, we’re likely to see the emergence of new, super-regional platforms that can capitalize on these demographic shifts.

8. Tech-Driven Risk Mitigation in Insurance

Rising insurance costs and limited coverage are becoming major concerns for multifamily property owners. In response, insurers are increasingly looking to properties that implement smart home technology for apartments to mitigate risks such as water damage and fires. Properties that adopt these technologies may benefit from lower premiums and more favorable coverage terms.

Additionally, data analytics is becoming more prevalent in the insurance industry, allowing insurers to assess specific risks and offer customized premiums based on an asset’s unique risk profile.

9. Targeted Marketing Campaigns for Engagement

Property managers increasingly seek to connect with local communities through targeted marketing partnerships. These campaigns help properties stand out in a competitive market and foster stronger relationships with residents and the broader community.

For example, partnerships with local sports teams or cultural organizations can enhance a property’s visibility and community presence. This approach is particularly effective in markets where traditional marketing efforts may be less impactful.

Discover 10 more ways to market your business in the multifamily market through partnerships, events, sponsorships, and syndications in our blog.

10. Renovations Focused on Flexibility and Remote Work

As the demand for flexible, remote workspaces continues to grow, developers are placing a greater emphasis on renovating common areas to accommodate this trend. Multifunctional spaces that blend work, leisure, and social interaction are becoming increasingly popular.

These renovated areas often include open kitchens, lounge seating, and work-from-home accommodations designed to create a vibrant and flexible environment for residents. By focusing on these renovations, developers can enhance the appeal of their properties and meet the evolving needs of today’s renters.

Adapting to the Future: Strategies for Multifamily Success

The multifamily market is navigating a complex landscape this year, with a mix of challenges and opportunities on the horizon. Staying informed about these trends is key to positioning your organization for success. Whether it’s through targeted marketing, strategic investments, or innovative property renovations, the key to thriving in this environment lies in staying agile and proactive.
At Criterion.B, we’re here to help you navigate these changes and maximize the opportunities. If you want to refine your marketing strategy or explore new avenues for growth, contact our team today.