Thomas Foley: Multifamily Underwriting Activity on the Rise Despite Economic Uncertainty
Multifamily underwriting activity has seen a significant increase in recent months, according to data company Archer.re. The rise can be attributed to several factors, including higher interest rates and economic uncertainty.
Archer’s proprietary technology platform reported a jump from 1,019 to 2,083 underwriting processes between August and October of this year. This surge is mainly focused on core-plus and value-add multifamily properties across various regions such as the Carolinas, Colorado, Texas and Pacific Northwest.
According to Thomas Foley , Co-founder and CEO of Archer.re , this uptick in underwriting activity is necessary due to current market conditions. In the past, it took an average of 50 underwritings for one closed deal; now it takes anywhere from 250-500 processes.
Foley also noted that three key drivers are contributing to this trend:
1) More deals are being pushed for year-end closing dates,
2) Owners are considering selling due rising costs,
3) It’s becoming increasingly difficult for investors to find attractive returns.
Geographically speaking,the interest in certain regions can be attributed largelyto rent growth trendsand favorable demographics.However,in coastal markets where insurance costs have become unaffordable,some investors have had topull back untilthe market softens.Foley predicts thatunderwriting capacity will continue increasing,and those who don’t utilize newer tools may face disadvantages when tryingto close deals going forward.This report highlights how despite challenges facing commercial real estate currently,multifamily properties remaina strong investment option with growing potentialfor successin various marketsacross the country.
