April 28, 2020
How the Multifamily Property Market Has Changed
The COVID-19 pandemic is currently a global phenomenon with about a third of the world’s population now sheltering in place. The short-term human and economic impact is unquestionable as people stay home, offices and retailers close, and both manufacturing and construction stall. In short, people can no longer meet, work, eat, shop, and socialize like they used to.
The impact on the rental market is undeniable. Here are some of the changes and impact on the multifamily market.
Renters are Staying Put
In uncertain times, people tend to stay put. While new leasing activity is down dramatically, property managers are reporting significantly higher residential retention rates. However, we’re now holding onto more renters than ever, increases on rents for renewals are flat-lining rather than previous 2% to 5%.
Rents Projected to Fall Slightly
As travel has come to a screeching halt, the AirBnB market has taken a hit, and short-term rentals are now being leased as long-term rentals. Many of the property professionals we talk with here at Property Vista are saying they expect rents to decline slightly throughout 2020. However, they remain bullish on the overall state of the previously thriving multifamily market and there is distinct optimism that rents will rebound through 2021, returning to pre-COVID-19 levels by early 2022.
Move to Virtual Office Accelerated
COVID-19 has underscored the need for online technologies that make managing properties virtually not only possible, but efficient and enhancing the tenant experience. Quite simply the availability of online leasing capabilities, virtual tours, communication portals for tenants and maintenance, and online payment tools has helped property managers keep some semblance of “normal.” More and more multifamily brands and properties will be looking to further integrate technology to leverage efficiencies, increase business resilience and scale their digital capacity. Even once life returns to its pre-pandemic state, the concept of working so close to one another in an office setting will no doubt influence more flexible work hour and work-from-home policies. Collaboration tools that helped teams function remotely during the quarantine will continue to be used post-COVID-19. (If you’re looking to boost efficiencies and collaboration, check out our pricing and book a demo.)
Tenant Relationships are a Priority
Between the uptick in lease renewals, the reduced number of rent increases and the temporary downward trend of lower rents, we will see more and more property firms foregoing a few dollars in rent in order to retain solid, reliable tenants who pay on time. Forging excellent relations with high-quality tenants in the era of social distancing may include newsletters or virtual gatherings. Property management companies have been arranging online-accessible gathers in their communities, like yoga demonstrations and even virtual happy hours to foster a sense of community, tenant goodwill and deeper relationships.
Luxury Market Could See a Hit
Class A multifamily properties are vulnerable in the immediate pandemic and post-pandemic months ahead. In a recent webinar, Derek Lobo of SVN Rock Advisors, noted that the rental velocity of Class-A apartments will probably slow down. While seniors may ride it out and stay put, younger tenants could be forced to move if they lose their jobs. New renters may sidestep luxury properties and instead opt for an upscale Class B unit instead to save money during uncertain times.
Class B is Solid
Class B properties continue to be solid, with high demand and less supply. However, tenant who have lost their jobs may take on roommates, and there could be an uptick in multi-person leases in the coming year.
Lease-Ups More Difficult
New buildings under construction may see delays and market conditions may make filling the new build more difficult. You’ll have to be flexible on pricing, concessions and rent income goals to lease up the new units. Digital marketing via PPC and social media, improved SEO efforts and email campaigns as well as virtual tours will be critical to helping reach leasing goals.
Disaster Preparedness Improved
As the pandemic grew and swept across North America, many property management firms realized that their business recovery plans addressed issues like fires, flooding and crime, but a process for dealing with the effect of a rampant virus on a building, tenants, staff and leasing agents was nowhere to be found. Luckily, property management firms were agile and stepped up communication with tenants, as well as cleaning of common areas. Non-essential common areas were closed off, and staff members worked from home where possible. It was a wake-up call to property firms across the country to review and improve on their business continuity and disaster preparedness plans.