Kimberly Byrum, Zonda
Kimberly Byrum, Zonda

Kimberly Byrum is managing principal for multifamily at Zonda, MFE’s parent company. As an expert in multifamily consumer research, rent positioning, and product design, she will dive into the latest industry trends and outlook during her Multifamily Market Update webinar May 9.

MFE caught up with her to discuss what markets she’s keeping a close eye on, what industry issues are keeping her up at night, and her favorite new amenities.

What key indicators are you watching today to analyze the health of the multifamily market?

For economic indicators:

  • 10-year Treasury (daily);
  • Job growth on the national and metro levels (monthly); and
  • Inverted yield curve (10-year versus two-year Treasury) and the Federal Reserve’s M1 (quarterly).

For multifamily market indicators:

  • Concessions (stabilized versus lease-up);
  • Lease-up absorption pace versus time in construction;
  • Stabilized occupancy levels; and
  • Multifamily permit activity.

With the surge in new supply coming online, what markets are you most concerned with becoming oversupplied?

  1. Austin, Texas;
  2. Phoenix;
  3. Nashville, Tennessee;
  4. Denver; and
  5. Dallas-Fort Worth.

Why are certain tertiary markets becoming attractive for developers?

The fastest-growing counties for domestic net migration in 2023 were suburban counties in Texas, Florida, and Georgia. Build-to-rent (BTR) developers are moving farther out in those popular suburban counties looking for land (in essence, following home builders, which makes Zonda’s new-home building data invaluable). BTR builders are proving up rents and demand in these tertiary locations. As a result, higher-density multifamily developers are following. This movement benefits the tertiaries and rural areas as it provides a variety of newly constructed rental options with different price points and unit offerings.

What trends are you watching in the multifamily industry?

  • As new development deals are almost impossible to pencil, we are starting to see bigger deals (i.e., more units in a project) and a resurgence of multi-use developments including hotels, condominiums, and active adult, which allows costs to be distributed over more units or multiple projects;
  • Many developers are looking to effectively deliver product (units) into the “gap.” Equity is very concerned with what is actually under construction and looking for the tail of supply at the overall market level. They don’t want the “researcher” answer that includes future pipeline out four to five years;
  • In the BTR space, our Zonda pipeline data is indicating a trend toward townhome development. We will be watching how these larger and higher-priced units are received in the market; and
  • Multifamily and BTR developers looking at land/development opportunities near popular master-planned communities.

Are you seeing any relief in sight on operating expenses?

There is anecdotal data suggesting that insurance rates may have peaked. I haven’t seen any hard numbers to quantify.Wage growth is down 100 basis points from 2022 but still is elevated at around 4.1% as of the fourth quarter. We don’t expect much relief in payroll and related costs until centralization efforts and prop technology/artificial intelligence harvest the opportunities to become more efficient with fewer full-time employees on-site.

What is keeping you up at night when it comes to multifamily development?

My Fed watching is on overdrive. Trying to provide strategic advice as the market sentiment changes, sometimes daily, is difficult as a business leader. Those who are looking for an all-clear signal from the Fed will miss the window of opportunity. We predict there will be no market-obvious inflection point. Right now, the era of free money is over, and the multifamily industry is working to define the new elevated benchmarks to assess future investment.

In addition, equity is patient and asking all the right questions. Zonda Advisory’s multifamily team thrives in this environment. We reassure investors by providing our clients with data and analysis showing that market risks have been appropriately underwritten.

What’s your new favorite amenity that you’ve seen in a multifamily development?

  • Strong market acceptance for smart-home technologies;
  • Urban mudroom replacing the typical entry closet;
  • In the BTR space, attic space storage in the homes;
  • Upgraded appliance packages that include smart refrigerators and induction cooking (high-rise); and
  • Pickleball courts.