Property Investors Pay Up for Apartment Deals as Rents Spike

There’s more money than ever betting that apartment rents are heading to new heights.

Investors spent $53 billion on multifamily real estate during in the three months ending in June, the most ever for the second quarter, according to data from Real Capital Analytics.

The spree extended a busy year for apartment investors that has included purchases by Blackstone Group Inc. and Starwood Capital Group. It was also fueled by real estate money moving to housing from offices, hotels and malls, which have fared poorly in the pandemic.

The influx of money has pushed prices higher and forced private equity firms to behave like the aggressive homebuyers in the frenzied housing market. Some investors are frustrated by current prices for apartment buildings. But many are raising their bids, waiving inspections and promising to close fast, with rising rents driving a flurry of deals.

“That’s what happens in a white-hot market,” said Matthew Lawton, executive managing director at JLL. “Some of them will sharpen the pencil on the next one and get a little more aggressive because they need to deploy that capital.

The surging interest in apartment buildings, generally viewed as safe assets that offer a hedge against inflation, is part of the fallout from the pandemic housing market. Soaring U.S. home prices, fueled by a shortage of inventory, have made it hard for many would-be buyers to find affordable properties, and that’s helping drive up rents.