Real Estate Trends In The United States And The Sunbelt


Real estate visionary, President & CEO at ABI Multifamily, and Co-founder of Neighborhood Ventures real estate crowdfunding company.

Rising interest rates have raised concerns about the real estate market; however, commercial real estate (CRE) investments continue their momentum this year, with multifamily in particular showing resiliency in the face of rising rates.

We saw investments in this sector increasing to $63 billion in the first quarter, a year-over-year increase of 56%, according to a new report out from CBRE. In this record-setting first quarter, multifamily investments accounted for 37% of total commercial real estate investment volume, ahead of office (21%) and industrial (20%). Overall, some geographic markets are faring better than others and will continue to do so.

We saw everything go into a temporary tailspin when the interest rates on commercial loans jumped 250 basis points. Higher rates, intended to cool inflation, have sent some markets into a stall. However, in healthy markets with strong rent growth and strong fundamentals, multifamily continues to see sustained interest in investing.

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It’s also important to emphasize the fact that hard assets tend to appreciate during times of inflation. Property values and rents typically rise as inflation rises, making real estate a great addition to any investment portfolio when wanting to hedge against inflation.

In Phoenix, where I live, we are seeing some changes due to the higher rates—namely a little less activity and a more conservative approach from both buyers and lenders. While an offering may have generated 30 offers before the rates went up, we may now see far fewer offers. But I think it is still a very strong market.

When considering where to invest, cities experiencing growth like Phoenix, Dallas and Orlando will certainly fare better than most and are likely to draw interest from investors who would have normally looked at other markets.

So what factors are investors looking for when selecting a market to make money on a multifamily investment? Job growth, population growth, income growth and rent growth. The Sun Belt seems to have all of these factors. Renters are continuing to migrate to the Sun Belt cities’ mild climate, more affordable cost of living, excellent quality of life and more space for the money than typically found in coastal cities. There are, of course, some exceptions; take Seattle for instance, where there is continued job growth similar to the Sun Belt bolstered by companies like Google, Microsoft and Starbucks.

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But as part of a trend, a Redfin report showed Phoenix as the top destination for migration within the U.S. in 2021, with 85,000 new residents choosing to relocate to Phoenix from other cities around the country. Dallas drew 56,000 new residents in 2021 followed by Orlando with 53,000. Overall, nine of the 10 top migration destinations were located in the Sun Belt. In addition to drawing new residents, a number of large corporations are choosing Sun Belt cities due to their strong labor markets, good weather, tax-friendly business environments and overall lower cost to do business. These trends are expected to continue in years to come.

Historically, it’s important to note that the Sun Belt has gone through cycles of boom and bust; however, each bust is always higher than the previous bust pricing. And, of course, the Sun Belt will have to continue to manage the water and heat issues in order to maintain the quality of life that continues to draw new residents.

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The bottom line is that while the inflation and interest rate pendulum continues to swing, some real estate investments are more likely to continue to thrive. I believe when looking at multifamily properties, it’s important to pay attention to growth markets that continue to draw new residents and companies. These should be at the top of any commercial real estate investor’s list.


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