Industry Trends Report | Wk of Apr. 27
HOT & RELEVANT TOPICS
Co-Working to Be Top Post-Pandemic Multifamily Amenity?
If working remotely remains the trend after the coronavirus pandemic, apartment communities may need to expand their co-working amenities. Even before the stay-at-home orders and office closures, co-working space was already becoming an amenity of choice for multifamily developers, but the new demand could accelerate that trend. Industry leaders anticipate that the size of co-working spaces will increase and property designs will cater to it. That includes the installation of fiber-backed internet throughout the building, not just in co-working or amenity spaces. Developers also might begin to design larger apartment floor plans with more integrated workspaces in the layouts.
NMHC: Significant Construction Delays Associated with COVID-19
More than half of apartment developers are reporting construction delays, as the National Multifamily Housing Council construction survey on April 14 indicated 56% were experiencing pandemic-related setbacks. Of those reporting delays, 70% indicated they were with new construction startups, an increase of 11% from March. Permitting appears to be a primary issue, as 77% reported associated challenges. Meanwhile, 28% reported a lack of materials is causing delays while 44% indicated that virus-related labor constraints have been an issue. Many developers are implementing new policies, as 75% have modified the approach to their operations.
Apartment Amenities Will Change Post-Pandemic — But How?
The apartment amenity war is currently on hold, as common areas are either shut down or extremely limited during the pandemic. But when things reopen, the demand for amenities will likely shift to some degree, as shared space could be altered as a COVID-19 after effect. Subtle post-pandemic alterations could include clubhouses with smaller, separate rooms rather than a fluid floor plan and better-equipped co-working spaces for work-from-home capabilities. Virtual leasing is also expected to significantly increase in popularity. The degree of which amenities change is largely contingent on “how short our memories prove to be,” according to Brian Eby, managing director for investment management company Nuveen.
IN THE NEWS
Pandemic Is a Worsening Threat to Class A Rental Housing Market
High-income households have accounted for a large portion of the apartment industry boom since 2010, which means new supply has been largely concentrated in the upper end of the market. But with rising demand and constricted supply of low- to moderate-cost rental properties, many Americans are caught in the middle. While state and city governments have stepped in with rental assistance programs in a dormant economy, the imbalance remains prominent. A recent report from the Harvard Joint Center for Housing Studies discovered that a majority of the lowest-income renters spend more than half of their monthly income on housing.
Outlook for Class C Apartments Muddied by Renters’ Loss of Income
It was anticipated that Class C apartment residents would be particularly impacted by the COVID-19 pandemic, considering residents are often those working in industries like hospitality and retail, which have been especially hard hit by the shutdown. However, in April, Class C residents were only 4% behind the national average in terms of making their rent payments. Assistance provided in the CARES Act, including expanded employment insurance and one-time cash payments, could help some Class C renters make their May lease payments, as well. However, registration and receipt of those benefits has been inconsistent, and the piecemeal eviction protections currently in place may leave many exposed in the months to come.
Commercial Lease Renegotiations in Age of Coronavirus
Property owners are starting to renegotiate lease deals with their commercial renters, including retailers at mixed-use apartment communities, as a result of the coronavirus pandemic—albeit with a conservative approach. Commercial renters are not just required to demonstrate the impact and provide current financials, but also reveal their exposure on other leases, arrangements they have made elsewhere and their business performance prior to the shutdown. Owners also have to assess whether accommodating a commercial renter today actually reduces the risk of losing the renter, or just defers it. Some owners are looking to protect themselves further by negotiating termination rights into their deals, eliminating pro-renter clauses and making failure to obtain lender approval an automatic default.