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Why the St. Louis multifamily market is 'on fire,' in or out of a pandemic

St. Louis was ranked No. 2 nationwide in the multifamily market coming out of the pandemic
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St. Louis, Missouri, USA downtown cityscape with the arch and courthouse at dusk.

ST. LOUIS — As apartments in St. Louis reach unprecedented levels in both occupancy and sales, experts are pointing to the local multifamily segment as a stable investment with opportunities for growth that right now rival almost any market in the country.

Resiliency was one of the factors cited by commercial real estate firm Newmark Zimmer in ranking St. Louis No. 2 nationwide in the multifamily market coming out of the pandemic, suggesting that the region’s strong metrics would likely drive future investment.

Rents went up in St. Louis during the pandemic, reaching $997 per month even as the occupancy rate dipped slightly, according to a market analysis from Saint Louis Bank. St. Louis also ranked high nationwide for positive net absorption, or the ratio of new apartments filled to old space vacated. The region's multifamily capitalization rate — the projected rate of return on a building sale — also surpasses the national average, according to CBRE research.

For investors, those are all signs of a good place to park your money.

“Multifamily’s been on fire the past few years, but I feel like this year’s been extremely busy,” said CBRE Executive Vice President Matt Bukhshtaber, a broker who specializes in multifamily deals. “Living in an apartment is such a recession-proof asset class because people need a place to live — offices and retail and all that, as economies get hit, businesses come and go, but people always need a place to live.”

Locally, brokers have long seen the region’s diversified employment base as a reason to invest in St. Louis. The economy is not reliant on a single sector, such as the way a city like Houston is inextricably connected to energy.

But during the pandemic, outside investors also began to recognize St. Louis’ strength.

Sales growth continued, with $637 million in apartment complexes sold last year, making it the third-highest year for apartment deals of the past 10 years, according to Yardi Matrix research.The price per unit rose 26.3% year over year through March to a record high of $148,386, according to Matrix.

Rents also continued to increase even as supply has grown by 14,044 new units since 2013. But the strength of that resilience could soon be tested: In addition to those existing new units, 4,491 units are currently under construction and another 9,800 are in planning stages. Although brokers say it's likely that many of those planned apartments never make it to construction, they also believe that because St. Louis has historically underbuilt that the market can absorb them.

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