Midwest Markets Gain Ground as Investors Seek Stability
LOS ANGELES–As the multifamily sector navigates through tightening regulations and financing headwinds, investors are increasingly turning to geography as a guidepost for opportunity. At the GlobeSt Multifamily conference in Los Angeles, panelists at the Multifamily State of the Industry session said regional dynamics are shaping investment strategies more than ever before.
Moderator Andrew Leahy, senior vice president at IPA, asked what must change for investors to look beyond traditional core and core-plus markets. Panelists agreed that shift is already underway.
“There’s a lot of interest in the Midwest,” said John Sebree, senior managing director at Lument. “It’s not overbuilt like the Sunbelt and isn’t weighed down by regulatory hurdles like California. Investors are seeing strong fundamentals and better returns.” He noted that transaction volumes in 2024 were higher than in 2023 despite broader market challenges.
For Otto Ozen, executive vice president at the Mogharebi Group, the move away from highly regulated markets is accelerating. “Legislative hurdles are pushing investors to places like Indiana, Omaha, and the East Coast. These are markets with fewer restrictions and more flexibility,” he said.
Still, California remains far from being written off. Kitty Wallace, vice chair at Colliers, predicted that the state’s long-term prospects will again surpass national averages. “In a couple of years, we’re going to look back and see California outpacing the rest of the country,” she said. Wallace added that success will depend on investors with agility—particularly those motivated by 1031 exchanges or with new capital ready to deploy.
Yet one persistent concern cuts across all regions: affordability. Ozen cautioned that with new construction at historic lows, housing costs continue to climb and could create broader economic strain. “Companies need housing to attract talent—if they can’t provide it, they’ll struggle,” he said.
Even with these challenges, the panelists expressed confidence in multifamily’s long-term fundamentals. “Fifteen years ago, institutions weren’t even looking at multifamily,” Sebree said. “Now it’s a core part of most portfolios. We’re still short on housing, and population growth will continue. That’s not changing.”
Ultimately, the takeaway was one of cautious optimism. The multifamily market remains difficult to navigate, but those prepared to adapt regionally and pursue creative strategies may emerge strongest in the next phase of growth.
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Source: GlobeSt/ALM