At Connect Apartments 2025 coming up on Thursday in Los Angeles, you’ll hear from capital markets experts in the “Multifamily Finance in Focus: Debt, Equity, and the Road Ahead” panel discussion. In advance of that in-person presentation, Connect CRE asked Gantry principal and “Multifamily Finance in Focus” panelist Jeff Wilcox what he’s seeing.
Q: Depending on the property type, obtaining capital can be a challenge in the current lending environment. Is multifamily far and away the easiest to source, or are there challenges here as well?
A: There is no doubt that multifamily has the most available capital allocated to it from all lending sources. The availability of capital makes multifamily financing easier than other asset classes, but it does not mean financing comes easy. Lenders are being very selective in their underwriting approach, given some of the trends we have seen with softening rents and continued increases in operating expenses. This is still a lender’s market, where they are dictating terms to the market versus borrowers being able to play multiple lending sources off one another to maximize their terms.
Q: Gantry works with a variety of lending sources. Are you seeing any sources becoming more active this year compared to 2024 or 2023?
A: 2025 is the year that banks have started to come back to the market. For the past few years, insurance companies, CMBS, debt funds and agencies were the dominant capital sources. Banks remained conservative as they worked through portfolio issues. As the market has stabilized and banks have worked through their larger portfolio concerns, they have come back into the market looking to actively lend on high quality assets with quality sponsorship. While their metrics have remained relatively conservative, the new capital source has provided much needed liquidity for acquisitions and refinance activity.
Q: We keep hearing that apartment development has trended downward. Are you seeing that as reflected in the number of borrower inquiries for construction loans as compared to acquisition or refinancing loans?
A: Construction activity for new apartments has trended downward for the past three years. The combination of increasing construction costs, decreasing rents, increasing expenses and increasing cap rates has been a deadly cocktail for all apartment developers. The good news is expenses seemed to be stabilizing and rents are trending upwards. If construction costs can stabilize, we should see a return to development activity as the broader California housing market remains undersupplied.
Q: You’re active nationally as well as in Southern California. Outside of SoCal, have you seen demand for capital increasing in other markets?
A: The San Francisco Bay Area is once again seeing very strong rent growth which is increasing capital demands. Utah remains a strong market despite a lot of recent supply. Seattle has started to rebound nicely as well. Various pockets of Arizona, Texas, Nevada and areas across the South have seen a good amount of negative rent growth, causing those markets to slow down considerably from their highs of 2022 and 2023. We expect those markets to stay soft for a few years as their economies find new footing and the existing inventory reaches stabilized performance.
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