The concept of a multifamily (or residential rental) building refers to buildings originally conceived exclusively for rental purposes. Unlike traditional buildings, where units are sold to multiple owners, in multifamily buildings the entire property belongs to a single owner, typically an investment fund or an insurance company. This single ownership allows for centralized, more efficient management with homogeneous quality standards.

Multifamily buildings are generally located in strategic areas of cities, especially near subway stations and urban services. They have higher levels of security, differentiated access for moving, amenities modern amenities and a range of furnished and unfurnished units available. On average, these buildings house between 150 and 200 apartments, with a predominance of 1-bedroom, 1-bath typologies. The target public tends to be young, professional and with medium to high incomes.

This model has established itself as a dominant form of urban housing in developed countries such as the United States, Canada and part of Europe, where residential rental is considered a structural solution to the rising cost of property ownership. The trend has also gained strength in emerging markets in Latin America -such as Mexico, Colombia and Brazil-, with initiatives led by institutional funds and specialized developers.

In Chile, the concept began to mature in the 2010s, driven by the professionalization of the rental market and the search for more stable real estate investment models. The high demand for well-located housing, together with the post-pandemic increase in the cost of mortgage loans, has positioned the multifamily as an increasingly relevant alternative.

According to the latest report from Colliersreport, the Chilean multifamily market closed 2024 with 163 operational buildingstotaling an accumulated inventory of 38,981 units. This represents an annualized growth of 26%considering an annualized horizon of three years to date, evidencing the dynamism of the sector. In the last quarter of 2024 alone, 2,233 new units were added. 2,233 new unitsunits were added in the last quarter of 2024 alone, corresponding to eight new buildings.

With regard to the geographic distribution of the current inventory, the commune of Santiago Santiago leads with 29,6% of the total number of units, followed by Estación Central (12.4%), La Florida (9.4%), Independencia (9.1%) Estación Central (12.4%), La Florida (9.4%), Independencia (9.1%) and La Florida (9.4%). y San Miguel (8.3%).. These areas stand out for their good connectivity, urban facilities and a demographic profile aligned with the rental supply.

With respect to typologies, the units of 1-bedroom, 1-bathroom (1D-1B) units predominate with 44% of the market, followed by 2-bedroom 2 bedrooms and 2 bathrooms (2D-2B)which represent 24%. These configurations also accounted for the majority of the new units entered during the year.

The average surface area of the multifamily apartments was 41,7 m² usableconsidering all typologies. The units 1D-1B units average 26,7 m²while 2D-2B stood at 55,3 m². Larger units, such as those with 3-bedroom, 2-bathroomreached 75,2 m².

In terms of rental prices, the average value was 0.265 UF/m²with variations according to the type of unit. The studio units had the highest value (0.40 UF/m²), followed by 1D-1B (0.34 UF/m²), followed by 1D-1B (0.34 UF/m²).) and 2D-2B (0.30 UF/m²) and 2D-2B (0.30 UF/m²).).

In terms of occupancy, the industry shows healthy figures: overall occupancy stood at 88%. 88%while occupancy in regime -that which reflects buildings already stabilized- stood at 92%. Communities such as San Miguel y Quinta Normal stood out with rates above 97%partly because they recorded no new entries during the quarter, thus favoring greater stability of the stock stock available.

Thus, the multifamily market continues to consolidate itself as an alternative to the structural conditions of the Chilean real estate sector. The combination of high mortgage rates, restrictions on access to credit and a and a growing gap between housing prices and real incomes has driven a greater demand for has led to an increased demand for rental housing solutions. Against this backdrop, the multifamily model has positioned itself as a solid option.

From the institutional investor's point of view, this segment offers steady income stream, lower vacancy levels compared to other real estate compared to other real estate assets and a scalable and professional scalable and professional operation. For tenants, it is a modern, well-located and efficiently managed housing alternative. modern, well-located and efficiently managed housing alternative..

Faced with this scenario, the multifamily model not only consolidates itself as a response to the limitations of the Chilean housing market, but also offers clear advantages for both investors and tenants, marking a turning point in the way of living and developing the city.

DISCLAIMER

Sebastian Mahave

Senior Analyst Real Estate Funds Fynsa AGF