I don't know how to drive a stick shift. Well, that's not quite accurate. I know how to drive a stick shift, but let's just say that my skill level leaves something to be desired.
My dad tried to teach me how to drive a stick when I was in my late teens. It didn't go so well. I think I stalled out at four intersections in a row before he decided that maybe we should wait a little longer before trying that again.
Once, in Mexico, I drove a rental car with a manual transmission in the middle of a thunderstorm and ended up getting the car stuck in about 2.5 feet of water. Some of the locals just stood and watched—they all knew better than to try to drive in a strong tropical storm. Others were kinder, trying to help me figure out how to get out of the water. (I did eventually get out of the flood. The rental car was not as lucky.)
Despite my many adventures with manual transmissions, I do enjoy them. The precision. The speed. The car's responsiveness. All of those things leave me wanting more. And despite my skill level, my favorite moment driving a manual is when you move the car out of first gear and into second.
Now, some people would say that going from first to second is actually the easiest step, but I disagree. Why? Because it's the move from first to second gear that signals the arrival of speed, direction, and purpose. And it's also that shift that requires you, as the driver, to know exactly what lies ahead and show the control necessary to get there safely.
If you ask me, the multifamily industry is sitting on the cusp of second gear. After stalling out in 2008 during the credit crunch, apartment owners and operators pulled back drastically— no one really wanted to face the uphill climb of finding financing, development partners, and profitable ventures among the drib-drab. And to be fair, there wasn't much out there to find.
Fast forward to 2010 and 2011, and the apartment engine has finally restarted. So what's next? What does second gear look like?
It turns out the paths forward are myriad, as we learned from our annual CFO Strategies Survey, conducted in August. Multifamily finance professionals are unanimously more optimistic about the future ahead of them and their companies, so much so that everything from development to acquisitions to new ventures is on the table. Roughly a quarter of the respondents are looking at new hires. And 38 percent of participants believe that they will be returning to the value-add side of the business, reinstating the use of trending rents in predicting returns, a practice not seen since before the downturn.
(For more on the results of the CFO Strategies Survey and the factors at play in the recovery, see “An Optimistic Bunch,” by senior editor Jerry Ascierto.)
Perhaps the most interesting— and frightening—thing about the industry's next iteration, however, is just how precarious it is. The truth is that while things may be phenomenally better, they're still not great. Unemployment levels continue to stagnate, distress continues to be a problem in neighborhoods across the nation, and defaults haven't fallen substantially, even in multifamily.
The consensus is that the government will eventually try to address the concerns, whether through GSE reform or further federal economic stimulation, but I worry that this reactionary behavior may be a too-little-too-late kind of move. Much of the solution will rely on the titans of the industry—including the leaders of the country's largest apartment firms—to make sure that they're in control in a fragile economy, especially as their optimism plays out in the rental arena. I guess, like the shift into second gear, it's a move that requires a whole lot of skill, and a little bit of luck.