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Investors - JANUARY 15, 2020

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Risk in the multifamily sector in a late-cycle environment

by Loretta Clodfelter

As commercial real estate enters a late-cycle environment, questions about risk are at the forefront of investors’ minds. Compared to other property types, the multifamily sector may be more insulated from cyclical upheaval.

“We believe that after a decade-long market cycle defined by a strong rebound and record growth following the 2009–2010 crisis, we are in the maturity phase of the investment cycle that will be defined by slower growth and possibly even a market correction,” said Elie Rieder, founder and CEO of Castle Lanterra Properties. He noted that 2019 was another strong year for the multifamily industry, with heavy transaction volume fueled by large amounts of capital that looked to be deployed into the asset class. Prices remained high, with yields staying mostly level and sometimes dipping lower than in 2018.

Apartment rents were up 3.1 percent during the

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