Phillip Nahas: Development Opportunities in a Maturing Multifamily Sector

There is no denying that multifamily has performed well over the past few years. The recovery of the sector preceded other commercial real estate property types after the most recent financial crisis. The apartment recovery is widely attributed to rental demand resulting directly from downturn issues including employment losses, the desire of the younger generation to have mobility, and a dramatic lack of financing for new home purchases.

Multifamily transactional activity has grown in concert with strong overall performance over the past few years. Rental growth has outpaced inflation, which has created enhanced returns to investors, driving more capital into the sector as well as increasing demand for quality acquisitions.

When apartments first started to rebound, new construction remained stagnant because financing for the build of new communities remained scarce. It took many lenders awhile to deal with existing non-performing assets and get comfortable with the idea of lending again. However, rental demand has continued to grow, many lenders have jumped back into the game and the construction of new product has increased.

Multifamily is maturing. However development opportunities do still exist, even as the availability for new home purchase financing has grown, interest rates remain low and sales increase. Location, market fundamentals, sustainable employment growth, low-cost financing and the creation of a unique product concept are key to development success in this climate.

Multifamily development opportunities are strongest in cities. Metropolitan regions will always have rental demand because they are job centers and because of the overall desire of multiple demographic groups to live in an amenity-rich environment.

Creating a unique community concept is becoming increasingly important, as well. Examples may include amenity-rich communities that address the metropolitan lifestyle. These types of communities may include higher-end attractions such as pet amenities, yoga studios, rooftop spaces, and other features that are more akin to upscale concierge-style condominium living.

Successful new projects today will also address renter desires relative to floor plans. They will bring to market something that does not exist or is scarce. For example, a lot of recent development embodies the micro-unit fad, with units much smaller than what most are used to. Because there are a lot of micro-units coming online in metro centers, larger and more unique floor plans will draw demand from renters looking for the comfort of larger spaces. The ultimate key is to differentiate your new community, to be very selective about where you place it and, most important, to match your amenities to your target audience.

Phillip Nahas is managing partner of Oak Coast Properties, an owner, developer and manager of multifamily and hotel properties. Visit Oak Coast Properties at and contact Phil at