For the most part, the multifamily sector “has so far defied gravity given what we’ve seen in the job market,” says Kimberly Byrum, managing principal, multifamily, at Meyers Research, a sister company to Multifamily Executive.
High-priced West Coast markets, such as the San Francisco Bay Area and Los Angeles, are feeling the most pain. According to Byrum during the Multifamily Market Outlook webinar at the end of August, the West has taken the biggest hit in demand, or net apartments absorbed, followed by the Northeast.
With the pipeline that is already under construction, Byrum estimates that the demand drop could result in a 100 to 200 basis point correction in occupancy.
“But while the demand for new units has stalled, what’s really interesting is that occupancies have held,” she adds.
During the start of the COVID-19 pandemic, apartment residents froze in place, with the nation seeing the highest renewal rates in April. The Midwest and South are operating above long-term norms, and the Northeast and West are in line with historical performance.
Even if renters move home with family members or turn to homeownership, Byrum adds that there’s no need to worry just yet.
“There’s a ton of slack in most of these markets where we normally operate. We’re at these really high occupancy rates in markets. If you look at where we are, we still have a lot of slack in the market.”
Another positive for the multifamily industry has been the number of renters who are adhering to the “social contract” of paying rent, citing the National Multifamily Housing Council’s Rent Payment Tracker that found that 90% of apartment households had made a full or partial rent payment by Aug. 20.
Single-Family Rental Momentum
One trend that Byrum is closely watching is the single-family built-to-rent model.
“This product type has been well received within the market,” says Byrum. “I definitely have not seen these premiums get competed away at this point.”
Single-family rentals have two distinct product types: platted lot subdivisions that are typically single-family homes with three- to four-bedrooms on individual lots targeting family renters with schools as a top concern and horizontal apartments with 150 to 200 attached and detached units with one- to three-bedrooms and small yards on a single platted piece of land.
“Horizontal apartments is a great place to be, and single-family rents are poised to take advantage of any reset in home prices on the West Coast,” she says.
Quarantine’s Impact on Future Design
The stay-at-home orders that kicked in at the start of the pandemic will definitely have an impact on new multifamily developments coming on line in 2022 and 2023.
Byrum says she expects touchless features will be even more important, such as automatic doors, keyless entry options, and even voice-controlled elevators. She also expects more emphasis on hand-washing stations, ventilation, open layouts, and more seating.
Work from home won’t be a blip, with Byrum suggesting developers could offer a premium for apartments with a 45- to 50-square foot designated home office cubby. In addition, personal office suites that can be reserved will continue to be an important amenity.
Fitness is also top of mind, with personal workout space and home gyms. She adds that Peloton bikes need a 3-foot by 6-foot space, and some of the options on the board add this extra personal workout space to the bedroom as well as private workout suites in clubhouses.
Finding ways to create natural living spaces for people to get outside will also become an even bigger priority.
To view the full webinar, visit https://outlook.builderonline.com/webinars/housing-insights.