Learn More about Federal Rental Assistance, the Amenities Advantage in Attracting New Renters, and more.
Here is the complete interview we had with him regarding the 2021 Multifamily Market outlook:
Question: What economic factors do you believe will have the greatest impact on the multifamily industry over the next two years?
Answer: First and foremost, streamlined and efficient distribution of federal rental assistance funds will play a key role in the multifamily housing industry’s future, both in the short and long term. Now that Congress has allocated the funds, the focus needs to be on getting those dollars to those who need them so that residents can make rent payments and rental housing providers can pay the bills that keep housing safe and operational.
Further, the continued reopening and recovery of the national and state economies will help stabilize the entire rental housing industry. As of March, the Department of Labor reported that 18 million people are still receiving some form of unemployment benefit. The sluggish labor market has translated into continued rent payment struggles, which ripples throughout the industry and causes particular harm to mom-and-pop owners/operators. However, as the economy continues to reopen and strengthen amid vaccine rollouts and financial relief efforts, more Americans can return to work and meet financial obligations, including rent.
Question: Demand for multifamily assets by investors remained higher than expected, considering the recession. What factors do you believe contributed to this?
Answer: Apartments have proven to be a resilient asset class. Although transaction volumes were down 28% in 2020, according to Real Capital Analytics, it was the second-best performance after the industrial sector. This compares to declines of 68% and 43% in the hotel and retail sectors, respectively. Pricing for apartment properties increased 8.3% in 2020, again second only to industrial. Job growth, pent-up demand from young adults living at home during the pandemic, and surges in home prices are expected to provide steady demand for apartments in 2021 and beyond.
Question: Many renters no longer feel that they can justify the high cost of urban living. Do you believe there are opportunities for urban landlord ds to mitigate this trend? For example, how can landlords able to provide value for tenants that would entice them to stay?
Answer: Over a year ago, much was unknown about COVID-19, and many of those who were able departed the urban cores in favor of more space and less densely occupied areas. Some who remained opted to take on a roommate or downsize to absorb pandemic-related financial stress, whether from job loss, underemployment, or unexpected expenses.
However, we do not believe that downtown is out forever. Though a timeline is hard to pin down, certain renter groups will return because of the convenience of downtown living, including the access to restaurants, entertainment, and amenities that urban living offers. While we are currently seeing urban markets throughout the nation offer concessions to attract prospective residents, the types of amenities offered also have a role to play in retention. Communities are embracing tech, reimagining shared spaces to fit health and safety requirements, and placing an emphasis on outdoor and green spaces, to name just a few examples. These all add value to the resident experience and positively impact a community’s overall lifestyle.
Question: As a result of COVID rents in larger cities like New York, San Francisco, and Los Angeles have dropped by 10% or more. Do you believe that these rents will return to pre-COVID levels within the next two years?
Answer: With vaccine rollout and relief efforts ramping up, there is some optimism for the years to come but we remain guarded – the industry’s long-term health is dependent on swift rental assistance distribution and sunsetting of dangerous, destructive policies like eviction moratoria. With those factors in mind, we do believe that there will be a return of pre-pandemic rent levels. In fact, RealPage projects that the national rental rate will likely return to pre-pandemic levels by the end of 2021 and begin to increase by the end of 2022.
Question: You have said that you believe the amenities of urban living will bring renters back to cities. What are some amenities that urban landlords can offer which would contribute to the return to urban living?
Answer: Adaptability has been and will remain critical for the apartment industry. Though shared amenities like fitness centers and pools remain highly desired, renters have shifted focus on in-unit amenities as well. These can range from in-home workspaces for telework or remote schooling, to larger kitchens, to personal outdoor spaces. There is also an emphasis on new technologies, including high-speed Wi-Fi, package tracking and locker systems, touchless devices in common areas, and reservation systems for shared amenities.
Question: Communication and portfolio management technologies have enabled landlords to maintain their properties and relationships with their tenants during Covid. Moving forward, are there other ways that you can see the multifamily industry benefiting from these technologies?
Answer: The past year has created a new dynamic and revamped not only the relationship between rental housing providers and residents but in many cases, enhanced communication efforts. Technology in large part made this possible and, as we look ahead, the communications channels and relationships cultivated through this time may set a new precedent where apartment communities function as true communities. This could impact resident retention and even new apartment searches, as residents elevate customer service and overall community connectedness to a higher level of priority in their search.
A key example is virtual touring, which though not a new phenomenon, surged during the past year. Prospective residents conducted their entire search process without ever seeing communities or units in person, and the industry swiftly adapted to this change to the benefit of all. Many apartment communities have invested in new technology, like high-quality videos and specialized training to give prospects a more complete picture of the community, and more are also upgrading other online resources and tools to supplement the touring process.
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