Multi-Family Remains Strong but Faces Hurdles

The uncertain outlook on office is also impacting sentiment on multifamily performance in metropolitan markets. The Winter 2023 Survey finds that urban multifamily assets have not recovered as quickly as those in suburban markets as migration trends outside of city centers continue and residents seek more affordable, transit-oriented housing options.

Two factors driving new multifamily development in the 2023-2025 period are the inland parts of the state experiencing growth in logistics and infrastructure construction, coupled with a series of state laws -- SB8, SB9 and SB10, and AB2011, AB2097 and AB2234 –- overriding some local building approval processes, therefore opening land currently zoned for single-family homes to the construction of small multifamily structures, and reducing barriers to multifamily construction in transit corridors.

“California has such a lack of supply. As such, interest rates and inflation won’t create a huge impact on land use entitlements and development,” says Spencer Kallick, partner at Allen Matkins. “The multifamily market is very hot right now.”

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