INDUSTRY VOICES
By Nicholas Leider
MULTIFAMILY ’ S PATH AHEAD
Caitlin Sugrue Walter , Ph . D .
Considering the national lockdown and resulting shelter-in-place orders after COVID-19 ’ s arrival in the U . S . last spring , the multifamily market was expectedly tight through June and July 2020 . But as state and local economies began to open , apartment markets quickly regained momentum . Sales volume and market tightness indexes from the National Multifamily Housing Council returned to pre-pandemic levels by January 2021 .
While the worst of the pandemic is in the rearview mirror — fingers crossed — multifamily is still facing an uncertain future . But Caitlin Sugrue Walter , Ph . D ., vice president for the National Multifamily Housing Council , points to a healthy recovery in late 2020 as reason for optimism .
“ We have seen a complete change in the leasing season , thanks to the pandemic ,” she says . “ If you look at 2020 , the numbers were extremely different than the previous year . COVID-19 pushed everything back to early summer , which was not as strong a leasing season as we typically see . But we are still working through that and absorptions are still pretty good .”
Some CRE experts speculate increased interest in suburban and exurban areas with a new emphasis on social distancing and growing aversion to dense population centers . Considering these broad trends , will major metropolitan areas see a decreased demand for multifamily and office properties in cities like New York , San Francisco , or Chicago ?
“ There are certain jobs that can only be done in these cities ,” Walter says . “ We ’ re expecting that there ’ s still going to be quite a bit of demand going forward . There was a little bit more movement from major metros [ in 2020 ] compared to previous years , but I don ’ t see it as an exodus from these cities . It was more that you didn ’ t have people moving in . For example , if you were living with your parents in a suburban area , and you held off moving for a year .”
But COVID-19 did accelerate some population trends that were already noticeable in 2018 and 2019 . The tumult — and growing ability to work remotely — may have allowed people to make changes sooner than later .
“ There ’ s definitely been a shift to some areas that already started to see a fair amount of attention ,” Walter says . “ They appear to have become even more popular — particularly Southern cities like Nashville , Tenn ., and Austin , Texas . The number of people moving to Texas in recent years is through the roof , so I don ’ t think that was a result of COVID-19 . I think there will be some more sorting out after COVID-19 as employers figure out workfrom-home and remote work policies .”
While the true impact of the pandemic will play out over the coming years and decades , multifamily remains an attractive destination for capital .
“ Especially when compared to other property types , apartment developments offer a pretty solid return ,” Walter says . “ It ’ s a long-term investment that can be appealing when compared to retail or office . Right now , it ’ s especially important to be careful , to account for uncertainty , and to do the necessary due diligence .”
As for long-term impacts in the design , construction , and operation of multifamily developments , Walter sees the market responding to COVID-19 in a similar fashion to localized natural disasters in the past .
“ Obviously , I think the industry is still working through its response as we learn more about public health and safety issues ,” she says . “ But I expect more emphasis on things like ventilation and sanitation . I see it more like how Houston responded to Hurricane Harvey — to plan for flooding after a major storm . A pandemic could be another thing that folks are going to make sure they put in their design needs going forward .”
But for now , CRE professionals can keep a finger on the pulse of the multifamily sector by monitoring key figures like the NMHC ’ s Rent Tracker , which calculates the percentage of rent payments made throughout a month . January 2021 clocked in at 93.2 percent of payments made by the end of the month , a slight dip from 95.8 percent in January 2020 and 93.8 percent in December 2020 .
“ It ’ s one indicator that ’ s helped show where we were at throughout COVID-19 ,” Walter says . “ Holding up around 90 percent , I think that ’ s reassuring to people . If something were to have happened , [ that figure ] would ’ ve shown it by now .”
Nicholas Leider
Senior content editor of Commercial Investment Real Estate Contact him at nleider @ ccim . com .
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COMMERCIAL INVESTMENT REAL ESTATE MAGAZINE SPRING 2021