Industry Trends Report | Wk of June 8
HOT & RELEVANT TOPICS
NMHC Releases Statement on Continuing Racial Inequities
In reaction to the recent killings of George Floyd, Ahmaud Arbery and Breonna Taylor, the National Multifamily Housing Council released a statement promising to combat racial inequity in the housing circuit. NMHC president Doug Bibby vowed the organization “will be steadfast in our aim of ensuring that apartment communities are available and open to all, regardless of race. As an industry that houses 40 million Americans—many of them people of color—we have an acute responsibility to do all we can to rid our communities of racial injustice and bias.” Noting the NMHC has been long committed to diversity, Bibby pledged the organization will continue to identify new ways to broaden access to the industry.
Solving Multifamily’s Four Biggest New Challenges
As the country begins to reopen following stay-at-home orders, the apartment industry will face new challenges—four of which require immediate attention. First, multifamily requires more full-service tech options to take prospects from lead to lease. Second, the industry needs to find a way to minimize rent delinquency by assisting residents experiencing extended financial hardships. Custom rent payment schedules may become the norm and start at lease signing. Third, the demand for transparent and proactive communication requires new, real-time platforms. Fourth, package orders have increased by 40 percent since the start of the pandemic, meaning multifamily will need to look to creative and collaborative delivery alternatives to keep pace.
Why It’s Critical to Recession-Proof Properties After Covid-19
The apartment industry is looking for ways to protect itself and ensure the success of its new developments as job losses increase and renters move in with family or migrate away from luxury communities. There are five key ways to increase the likelihood of success. First, make sure project designs match the market demands. Second, make value a priority by pairing functional designs and durable materials with impeccable customer service. Third, use design as a selling point via elements that are relevant for multiple generations. Fourth, make sustainable design decisions by including renewable, recyclable, low-waste building materials. Fifth, create adaptable amenities to ensure that no space goes to waste.
IN THE NEWS
Seven CRE Economists Offer Their Advice, Predictions
A handful of commercial real estate economists recently offered their predictions for the future of the sector, ranging from cautiously optimistic to a little more uncertain. One predicts that the CRE market will not recover until late 2021/early 2022 at the earliest. That’s because it’s impossible to forecast when job growth will reignite, and the propensity of some states to open early could lead to a significant second wave of the pandemic. Others see CRE recovering quickly, based on the fast pickup experienced by the restaurant and lodging sectors as they begin to reopen. One says to invest with confidence because unlike the Great Recession, this crisis wasn’t borne of bad debt and the structure of the economy is not the problem.
Multifamily Rents Holding up Better Than Expected
Despite mass unemployment, multifamily rental payments have held up much better than industry experts projected at the onset of the coronavirus pandemic. In May, 87.7% of apartment households made full or partial rent payments within the first two weeks of the month, according to the NMHC rent payment tracker. That’s up from 85% in April, and just slightly down from the 89.8% from May 2019. Class C properties are running about 5% lower. The figures are bolstered by the federal $600-a-week unemployment benefits put in place as part of the CARES Act, on top of state distributions. However, barring an extension, that benefit is set to expire at the end of July.
Short-Term Rental Market Faces Consolidation
With the travel industry at a virtual standstill during the pandemic, many owners of short-term rental buildings are offloading their properties in an effort to cut their losses. These largely consist of venture capital-funded companies and mom-and-pop businesses that are least equipped to handle their share of the travel industry’s reported $195 billion in losses since March. Meanwhile, larger property owners are hopping on the opportunity to buy low and accruing these building either as future short-term rentals or to convert them into traditional apartment communities. They are banking on the idea that high demand for STRs will return in the near future.