There are a lot of reasons to invest in multifamily today. Following the pandemic, apartment investors are enjoying substantial rent growth, record low vacancy rates, and an attractive supply-demand imbalance. But, institutional capital playing in the core and core-plus market, is more attracted to the stability of the asset class over the long term.

At the Multifamily conference this week, Cameron Jones, managing director of US Housing Strategic Transactions at Nuveen, and Angela M. Kralovec, VP of reinvestment and redevelopment at Essex Property Trust, sat down for a conversation on strategy, opportunity, and investing at the Multifamily conference, and discussed how institutions take a different approach to apartment investing.

“We like multifamily because it provides a bond-like return and because it provides an inflation hedge because leases turn on the regular,” said Kralovec. Jones agreed, adding what she called the obvious—multifamily is the only truly, essential asset class. “We don’t need a mall for living, and we don’t need an office space to work.” For that reason, multifamily has a durable income stream.

The two investors also take a unique approach to multifamily investment. Nuveen, according to Jones, is focused on demographics and changes in housing needs related to those demographics. For aging millennials, for example, the company will focus on single-family rentals and larger units, or it is focused on service-based amenities for residents in need of naturally occurring affordable housing. This year, the investor will deploy $2.5 billion toward housing investments.

In Kralovec’s role at Essex, she looks for ways to unlock value within the existing portfolio. This could mean anything from a standard upgrade with new finishes or appliances, or large renovation projects that convert common spaces into higher and better users, which could be additional rental units or a more in-demand amenity. “My challenge is to look through the entire portfolio and figure out where to go first. There are a high number of opportunities,” she said.

On the acquisition side, Essex focuses on properties that they can buy at scale. It does little trading, opting instead to hold the properties in the long-term, and it needs to see strong fundamentals in the markets where it is active that will support long-term growth. For that reason, the company is most active in class-A and class-B product that is near, but not in, the urban core.

And, Kralovec added that the firm still loves California, despite the headlines of an exodus. She said the market still has strong fundamentals, a supply-demand imbalance, and limited opportunity for significant new development. She says that only 10% to 15% of the portfolio is true urban core, which served them well during the pandemic.