Credit: Jan Baborak / UnsplashU.S Multifamily Investment, Development & Rental Growth
July 24, 2020Real Estate
GRI Club US members gathered online to discuss the US Multifamily market, highlighting investment and development strategies, asset pricing, rents, movements in risk and emergency trends throughout social distancing and new demographic demands.
It was remarkable to hear anecdotes of how asset owners were inspiring confidence through the COVID uncertainty and how to gain a value-added advantage in development deals.
Read on for a full summary of the collegial zoom discussion from the 16th July.
With the current scenario, the multifamily sector is facing an impact with unemployment rates and the Coronavirus crisis. But housing is becoming a central need product right now and multifamily assets are interesting for institutional investors looking to deploy capital in new real estate opportunities. Most of these investors are really looking at their own portfolio and seeking interesting moves on asset types and how they are going to behave in this cycle. Multifamily is one of the most resilient assets and has less volatility compared to other asset classes on a risk adjustment basis.
That's why multifamily is one of the biggest sectors in the US and still attractive for most of the investors that have a continued interest in such assets in the past few years. Presently,, most owners see an increase in occupancy rates and strong percentage of cash collection;most didn't face any deferral on rents.
On the transactional side, most players are not seeing any change in price and price discovery.. Developers are trying to launch different product types , focusing on strategies to be more competitive and repositioning asset types with positive trends that have been accelerated in the past months, like people looking at open spaces in suburban areas. The operational side of the sector is the most challenging nowadays, to inspire confidence through health and wellness measures.
Nowadays, shifts are happening across all real estate assets, but it is hard to predict the impact on urban and new suburban values. The main investors are planning to adjust their multifamily activity, increasing investments in the upcoming years. They expect to have corrections for the multifamily market between 6-12 months, with more optimism from their side and going back on the market looking for new opportunities and higher returns in the upcoming months for mid and long-term strategies.
Market Sentiment from GRI USA Club Members:
How are you planning to adjust your multifamily investment activity?
Answers:
Strong decrease - 3%
Decrease - 6%
Slight decrease - 6%
Maintenance - 16%
Slight increase - 19%
Increase - 38%
Strong increase - 13%
When can we expect corrections for the multifamily market?
Answers:
Within 3 months - 7%
Within 6 months - 31%
Within 9 months - 28%
Within 12 months - 24%
Greater than 18 months 10%
*Polling questions were answered by 60 senior executives in the real estate market on 16th July 2020.
The debate was moderated by Sohail Hassan (MarketSpace Capital) and attended by Jonathan Slager (Bridge Investment Group), Kevin Harrell (Lennar Multifamily Communities), Kimberly Bays (Exponential Property Group), Kyle Dupree (LaSalle IM), Peter Plaut (Wimmer Family Office), and many others.
By Ludwig Menke
It was remarkable to hear anecdotes of how asset owners were inspiring confidence through the COVID uncertainty and how to gain a value-added advantage in development deals.
Read on for a full summary of the collegial zoom discussion from the 16th July.
Summary
Middle-class America just got a little bit larger as a result of unemployment trends, wealth decline in the stock market and the inability for folks to earn additional income from a side-hustle or a second job. Renting is no longer a temporary solution as individuals save up money for their first starter homes. Instead, it’s becoming a permanent housing choice for many individuals who can no longer qualify for a mortgage or want the freedom and affordability that renting can provide.With the current scenario, the multifamily sector is facing an impact with unemployment rates and the Coronavirus crisis. But housing is becoming a central need product right now and multifamily assets are interesting for institutional investors looking to deploy capital in new real estate opportunities. Most of these investors are really looking at their own portfolio and seeking interesting moves on asset types and how they are going to behave in this cycle. Multifamily is one of the most resilient assets and has less volatility compared to other asset classes on a risk adjustment basis.
That's why multifamily is one of the biggest sectors in the US and still attractive for most of the investors that have a continued interest in such assets in the past few years. Presently,, most owners see an increase in occupancy rates and strong percentage of cash collection;most didn't face any deferral on rents.
On the transactional side, most players are not seeing any change in price and price discovery.. Developers are trying to launch different product types , focusing on strategies to be more competitive and repositioning asset types with positive trends that have been accelerated in the past months, like people looking at open spaces in suburban areas. The operational side of the sector is the most challenging nowadays, to inspire confidence through health and wellness measures.
Nowadays, shifts are happening across all real estate assets, but it is hard to predict the impact on urban and new suburban values. The main investors are planning to adjust their multifamily activity, increasing investments in the upcoming years. They expect to have corrections for the multifamily market between 6-12 months, with more optimism from their side and going back on the market looking for new opportunities and higher returns in the upcoming months for mid and long-term strategies.
Participants Conclusion
“Multifamily sector provides a great risk/reward opportunity and we continue to focus on debt and equity financing from $100mm to well over $1 billion in the sector” (Peter Plaut, Executive Director, Wimmer Family Office).Market Sentiment from GRI USA Club Members:
How are you planning to adjust your multifamily investment activity?
Answers:
Strong decrease - 3%
Decrease - 6%
Slight decrease - 6%
Maintenance - 16%
Slight increase - 19%
Increase - 38%
Strong increase - 13%
When can we expect corrections for the multifamily market?
Answers:
Within 3 months - 7%
Within 6 months - 31%
Within 9 months - 28%
Within 12 months - 24%
Greater than 18 months 10%
*Polling questions were answered by 60 senior executives in the real estate market on 16th July 2020.
The debate was moderated by Sohail Hassan (MarketSpace Capital) and attended by Jonathan Slager (Bridge Investment Group), Kevin Harrell (Lennar Multifamily Communities), Kimberly Bays (Exponential Property Group), Kyle Dupree (LaSalle IM), Peter Plaut (Wimmer Family Office), and many others.
The GRI Club Real Estate agenda in the US
The GRI Club Real Estate USA eMeetings agenda for 2020 is now available. Know what's ahead.By Ludwig Menke
