Global Tycoons Turn to US Multifamily Buildings in Billion-Dollar Bets

A rising number of the super-rich are placing their bets on the US rental market as falling prices in the apartment sector make it increasingly attractive.

Shifting market: Over the last decade, investments by the ultra-wealthy in multifamily housing have surged. Why is that? The enduring appeal is partly due to their attractive return rates and promising rent increase prospects, stemming from an ongoing supply shortage in the housing market. This trend marks a strategic shift from pre-pandemic times when investments were predominantly focused on office properties, offering stable income through long-term leases.

Billionaire bets: A prime example of this trend is Chicago’s luxurious 727 West Madison tower, which has a new owner, billionaire Amancio Ortega, founder of Zara, who purchased the property for $232 million. This deal follows similar investments, such as Israeli billionaire Eyal Ofer’s acquisition of a 57-unit building near Manhattan’s Gramercy Park. Additionally, wealthy families from Latin America and firms backed by global investors like David Rubenstein are also exploring opportunities in the multifamily building sector, seeking to capitalize on the current real estate market dislocations.

Rental housing > office spaces: The shift towards remote work and a rise in office vacancies post-pandemic have prompted wealthy investors to pivot from office properties to rental housing. This move has been accelerated by a commercial property downturn, marked by a 57% YoY drop in global investment to $142 billion in Q2. While institutional players are cautious due to heightened borrowing costs and falling values, wealthy investors are seizing opportunities with the capability to leverage cash payments or secure financing through strong banking relationships.

Attractive gap: Amidst the rise of remote work and office vacancies, wealthy investors are shifting from office properties to rental housing. A 57% YoY drop in global property investment in Q2 further accelerated this shift. While some institutions are cautious due to heightened borrowing costs and falling values, affluent cash-rich investors see opportunity, especially with sustained housing demand that boosted median rents significantly in recent years.

➥ THE TAKEAWAY

Shaping the future: The convergence of falling apartment prices and increasing rental demands is painting a lucrative picture for the world’s richest to strategically bolster their real estate portfolios. This shift in investment preference signals a newfound confidence in the long-term profitability of the multifamily housing sector amidst the ongoing commercial property slowdown. Moreover, the broadening of rental-housing deals globally hints at the unfolding of a multifaceted investment landscape, potentially redefining wealth accumulation strategies for the mega-rich in the coming years.