Institutional investors eye US multifamily housing as alternative investment

A luxury mixed-use residential complex in the city of Miami, Fla., U.S., acquired by HM Group / Courtesy of HM Group

An increasing number of Korean institutional investors are eyeing multifamily housing in the U.S. as an alternative investment destination amid soaring rent and home prices there, according to industry officials, Monday.

Multifamily housing refers to upscale residential properties operated as rentals rather than for sale. These assets are considered relatively less volatile during economic downturns compared to commercial properties.

The Public Officials Benefit Association, a Seoul-based institutional investor managing funds for local government officials, formed a joint venture with the California State Teachers’ Retirement System in February 2022 and has sought stable rental income by investing in U.S. multifamily housing. The committed investment amounts to about 240 billion won ($166.4 million), with properties in Silicon Valley, Los Angeles, Boston and Miami.

Korea Investment Corporation (KIC), the country's sovereign wealth fund, has also been consistently investing in multifamily assets through funds each year.

"Since the COVID-19 pandemic, sector differentiation in the global real estate market has become more pronounced," a KIC official said. "We see the multifamily sector as having strong structural growth potential in the mid to long term and are actively seeking investment opportunities."

The private sector is also showing strong interest. Real estate development firm Hospitality Management Group recently acquired a luxury mixed-use residential complex in Miami for $190 million through its subsidiary Consus Asset Management. The firm plans to continue its strategic focus on overseas multifamily assets as part of its expansion.

"Multifamily assets are relatively less volatile during downturns in the global commercial real estate market," Consus Asset Management Executive Moon Kyung-rok said.

Historically, multifamily properties were not a major investment focus for Korean institutional investors, who primarily allocated their overseas real estate investments to commercial properties such as offices, retail spaces and logistics centers.

However, since COVID-19, investment demand for office properties has declined sharply. Rising vacancy rates due to the expansion of remote work, coupled with higher interest rates, have significantly reduced investor interest.

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The multifamily sector has remained relatively resilient. Its shorter lease terms allow rental rates to adjust more quickly in response to inflation and interest rate fluctuations, helping sustain price stability and transaction volume.

Additionally, the rising cost of homeownership continues to push more people toward renting, further fueling investment in the sector. Analysts suggest that this trend could intensify if U.S. President Donald Trump's proposed tariffs take effect, potentially driving house prices even higher by increasing construction material costs.

A substantial number of high-quality assets are already entering the market as loan repayment challenges force some owners to sell their properties, according to global investment firm KKR. About $940 billion in multifamily debt is set to mature over the next five years.

Beyond economic factors, the sector's growth is also supported by shifting demographic preferences. Millennials, those born between 1981 and 1996, prioritize convenience and lifestyle amenities, making multifamily developments — often featuring fitness centers, lounges and co-working spaces — especially appealing.

The market is expected to see more growth. According to global real estate services firm CBRE, multifamily properties accounted for the largest share, or 36 percent, of total U.S. commercial real estate investment last year. In the fourth quarter of 2024 alone, investment in the sector surged to $43.4 billion, marking a remarkable 59 percent year-over-year increase.

Industry officials predict it will remain one of the most promising investment opportunities in the U.S. over the next one to two years.

"Korean investor-funded real estate funds in the U.S. have been increasing their allocation to the multifamily sector, with plans to maintain or further expand this focus moving forward," said an official from Koramco REITs Management and Trust.

Since the peak of the COVID-19 pandemic in 2021, Koramco has managed 1.2 trillion won worth of real estate funds, investing in multifamily properties near Syracuse University in New York and the University of Texas at Austin, targeting luxurious student housing.

"It's essential to analyze population trends when making investment decisions, as demand for multifamily assets varies depending on economic conditions and demographic shifts across U.S. cities," the Koramco official said. "Given these dynamics, partnering with a reliable local asset manager is critical to navigating market trends and making successful investments in the sector."