You can’t make this stuff up! On this mid-May morning, a barely post-toddler, eight-year-old company—the brainstorm of a socially challenged undergraduate—is about to price itself at a value of more than $100 billion, while on the very same day, Greece, a 3,000-year-old civilization, is teetering, one headline away from another total financial meltdown and exile from the European currency market.
Facebook, today, is the future. And Greece? Well, you tell me.
Anyone else struck by the irony in this?
To me, it’s not simply a question of the trajectory of a digital empire versus the decline of the epitome of cultures that rested solidly through the centuries on sticks and bricks. It’s a question of how value happens today, and how it goes away.
Which is what connects this juxtaposition of Facebook with Greece to the challenge we’re seeing in this moment of opportunity and of truth for players who count on dollars gaining more value when they’re placed to work in multifamily’s arena.
No doubt, in raw form, demand fundamentals for multifamily remain a powerful argument to feed the multifamily capacity machine. Household formations among Millennials will happen, as will new households among international migrants who are still drawn to America for jobs, political freedom, educational opportunity, etc. Likewise, downsizing Baby Boom households will need their next home, likely featuring solutions to complexity, to energy costs, to inconvenience, to comfort, which apartments readily offer.
Fundamental demand should be fine. The question of the moment, and what everybody who’s got skin in the multifamily game right now is asking, is how and where and for how long will that fundamental demand manifest? Is money placed in this game well-spent? How is it done right? Those questions make it tough for investors, stakeholders, sponsors, and vested and invested players of all kinds to stand with conviction, because a piddly little two-letter word, “if,” seems to want to infiltrate every conviction and scenario and wreak havoc on forward planning.
So, how does value happen in multifamily today? Is flexibility a trump-card feature of some new American Dream of home rentership, for which people will willingly pay a premium? Something’s telling us, we’re going to find out the answer to that question fairly soon, maybe as soon as the next 24 months.
Too—and this one’s more in the be-careful-what-you-wish-for category—all those who were looking at demographics, at the financial fallout of the foreclosure crisis, and at ongoing access-to-credit constraints of housing finance present and near-term future had to have been thinking, “Boy, it’s going to be good for us, because the market’s coming our way. We’ve tilted the playing field toward apartments; now, let’s build, and they will come.”
Maybe that’s half true.
Given what we’re seeing play out, it seems that what apartment managers, developers, investors, owners, etc. hadn’t counted on was the level to which single-family rental would raise its game.
Actual human household behavior will be the ultimate arbiter, but the case for single-family for-rent has emerged as a big pain in the you-know-what for multifamily players. That’s despite the geography of this inventory, the difficulty of managing scattered-site properties, and other general challenges to efficiency of scale.
Fact is, both people and money have gravitated into these homes versus apartments. The narrative is that even if people can’t afford or don’t want to own, they want the community, the schools, the lifestyle, the independence that living in a house as opposed to living in an apartment gives them.
So, I’d argue flexibility may be an important value generator when it comes to motivating your potential residents to move your way. But it seems to me that the enormity of Facebook’s moment and promise bases itself on something you, too, need to promise above all your other values: community.