US Multifamily Loan Losses Tripled Since 2021

A recent MSCI report reveals that U.S. multifamily loan losses surged to 16% from just 5% in the prior two years.

US Multifamily Loan Losses Tripled Since 2021

A recent MSCI report reveals that U.S. multifamily loan losses surged to 16% from just 5% in the prior two years.

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Good morning. Multifamily loan losses spiked last year, more than tripling since two years ago. Meanwhile, Orlando's self-storage market boom leads to declining rental rates amid excess supply.

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*Data as of 3/21/2024 market close.


U.S. Multifamily Loan Losses Spiked 3x in 2023

A recent MSCI report reveals that U.S. multifamily loan losses surged to 16% from just 5% in the prior two years.

Losing momentum: While still below levels seen during the GFC, the 16% loan loss figure for apartments is a cause for concern within the multifamily sector. Notably, apartment loans last year faced a higher loss rate compared to office and retail loans, remaining below 20% for most of the last decade.

Maturity challenges: A significant portion of CRE loans maturing in 2024 are tied to apartments, accounting for 32% of the total loans due this year. Totaling $194B, these loans are a big problem for multifamily owners, with offices being the second most exposed asset class.

Rental market: The influx of multifamily developments during the pandemic has led to declining rents and property values, further compounding the sector's challenges. CBRE reports a 1.2% drop in rent prices in Q4 2023, while MSCI observes an 8.9% decline in apartment prices year-over-year.

Borrower distress: Struggles with loan repayments are more prevalent among multifamily borrowers, as seen in examples like Applesway Investment Group's default on a $65.2M loan for a Houston apartment complex and an apartment complex foreclosure in November due to a $288M loan default that originated in February 2022.


Digging for treasure: Despite rising distress for multifamily, investors are eyeing potential "generational opportunities" during the current market dislocation, with approximately $260B in capital targeting North American real estate. While the sector faces significant turmoil, investors may find opportunity.


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✍️ Editor’s Picks

  • Spring surprise: U.S. existing-home sales surged 9.5% in February, marking the first back-to-back increase in over two years.

  • Change is in the air: Brookfield (BN) CEO Bruce Flatt has been at the helm of the global asset manager’s operations for over 20 years, and he believes CRE is reaching an inflection point.

  • Schooling crisis: The World School cancels its Miami campus plans, impacting wealthy families seeking private school options in shortage.


  • Rent rebound: LA apartment rents are rebounding, with median rent up 0.2% in February to $2,061 monthly, although the annual decrease is nearly 3.9%.

  • Coastal living: StoneSteps Real Estate and DMJ Capital Partners are thrilled to present their latest investment offering, a value-add reposition of a 53-unit community in Imperial Beach, CA. (sponsored)

  • Homeownership hurdles: Home buying costs surged in 2021, leading to a 38% difference between mortgage payments and apartment rents by 2023.

  • Equality codified: New Jersey Gov. Murphy signed a historic bill codifying how many affordable housing units are needed per town. Overall, the Garden State needs around 200K more units.

  • Hollywood haven: Affiliated Development secured a $45.5M loan for a 223-unit Hollywood project with half of all apartments reserved for workforce housing.

🏭 Industrial

  • Industrial upswing: NAIOP anticipates that the U.S. industrial market will expand with an estimated 14MSF quarterly net absorption for 2024–2025.

  • In the name of Industry: Three major investors debut private industrial REITs, including Fortress Net Lease REIT with $142.7M in assets.

  • Chip leader boon: The White House awards Intel (INTC) $8.5B under the CHIPS Act for semiconductor expansion, potentially cornering 20% of global chipmaking capacity.

  • Tacoma expansion: Bridge Industrial secured $413M in financing to build a 2.5MSF industrial campus with four distribution warehouses in Tacoma.


  • Great Northern revival: A partnership between Hart Lyman Cos. and Conifer Realty is planning a $1B development for a 215-acre Great Northern Mall site in Clay.

  • Shopping spree: TRC Retail acquired the La Cañada Flintridge mall (in LA, not Canada) for $66M at around $574PSF, sold by IDS Real Estate Group.

  • West Village wellness: Luxury gym Continuum Club is set to open at Rockrose Development’s Archive building in West Village, offering diverse wellness services.

  • Spending cautiously: The retail sales forecast for 2024 is between $5.23–$5.28T, a 2.5–3.5% increase, as online sales are expected to grow 7–9%.


  • Real estate reckoning: Short sellers are stacking their bets against CRE as values drop, with Equinix Inc. (EQIX) facing pressure. REITs are heavily shorted globally.

  • Afterpay shake-up: Afterpay (SQ) seeks to sublease its 50.3KSF San Francisco office amid a national trend, with 62MSF of office space vacated in the past year alone.


Orlando's Self-Storage Sector Sees Shifts in Rents as Pandemic Boom Cools

Here's how Orlando's booming influx of self-storage space is affecting rental rates

Self-storage facilities are a popular asset type with investors, especially in high-growth areas such as Central Florida. AJ_WATT

Metro Orlando has become a hotspot for self-storage development, ranking fourth in the nation for new space in 2023, according to a report from RentCafe. 

Supply surpasses demand: Orlando added 372.4K SF of self-storage space last year, surpassing other major cities in Florida. However, this rapid expansion seems to be outpacing demand, leading to a noticeable dip in rental rates.

Cooling down: According to the report, rents of self-storage units are trending downward in 90% of the 150 major cities across the nation. This includes cities in the Sunbelt known for their high rates of incoming residents, like Orlando, Phoenix, and Las Vegas, which are facing housing challenges that have a direct effect on the storage sector.

Case in point: The report noted that the average rent for a self-storage unit in Orlando, known as the "street rate," stood at $129 per unit, reflecting a decrease of 6.3% over the past year and 0.3% from the previous month. This positions Orlando with the third largest annual decline in these rates across Florida, following only behind Hialeah with an 11.1% drop and Port St. Lucie with a 7.4% decrease. On a national scale, the reduction in street rates averages out to 3%.


Looking ahead: Despite the drop in rental rates, experts remain optimistic about self-storage's long-term outlook. The sector continues to attract investors due to its resilience and natural synergy with life events like relocation, death, or divorce. Industry leaders like Robert Moser emphasize that self-storage can offer consistent returns regardless of economic conditions.


At $97T, global debt is 40% higher than it was in 2019, and the $33.2T piece that belongs to the U.S. makes up 34.21% of the pie. Happy Friday!

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