A rise in U.S business spending will allow multifamily market fundamentals to finally catch up with pricing, according to Marcus & Millichap. The California-based investment sales brokerage reports that the multifamily investment sales market will see greater demand this year as the "perfect storm" that has plagued apartment owners begins to subside.

"The most unusual characteristic of the recent downturn has been that property values have risen in spite of deteriorating real estate fundamentals," says Harvey Green, Marcus & Millichap president and CEO. "Many investors have become concerned over this dynamic and the outlook for real estate investments, but over the next several years, real estate pricing will be supported by three factors: strong capital flows, an orderly economic transition led by improving rents and occupancies and an economic expansion cycle with favorable demographics and job growth."

Renter demand for multifamily product will improve as consumer confidence grows and the affordability of single-family housing declines. Yet despite increasing demand, there remains an oversupply of new units in the development pipeline.

Marcus & Millichap also projects that concessions will begin to abate this year, particularly among Class-B and -C properties. Asking rents are expected to rise 1.5% in the same time period.

In addition, Marcus & Millichap projects that strong demographic and immigration trends will fuel tenant demand. As the economy improves, this may compel investors to upgrade from Class-B and - C properties to Class-A properties.