Multifamily Property

Commercial Real Estate Trends: The Latest in Multifamily

This article is part of a series covering recent commercial real estate trends by asset class.

2020 has been a year of change.

In fact, the changes have been so drastic and widespread that you rarely hear anyone utter the word normal without first adding the word new.

That’s been just as true for commercial real estate (CRE) as it’s been for our day-to-day lives.

In Part 4 of our series on CRE trends, we’ll cover how those changes have affected the multifamily sector.

Multifamily trends you need to know

Multifamily is often one of the most reliable asset classes to invest in during an economic downturn.

As ArborCrowd pointed out, during a recession, “people are likely to save cash and cut spending,” but they “will continue to need a place to live.”

The article went on to say, “During a time where liquidity is important, most people will not look to buy homes, which is a major purchase. In fact, it can be more challenging for people to qualify for mortgages during a recession as lenders typically originate less loans due to liquidity constraints and more carefully scrutinize mortgage loan applications. Therefore, it’s likely that the share of renters will increase during these uncertain times.”

So, when the COVID-19 pandemic resulted in economic volatility, how did multifamily fare?

The results are mixed.

On one hand, data from GlobeSt shows “a significant decline in households paying rent, which comes on the heels of other research highlighting distress in the multifamily segment.”

On the other, apartment prices are increasing, while prices in office and retail decline.

But the pandemic’s effects on multifamily extend beyond prices and rent collections. It’s also had an impact on the properties themselves.

In an article on Architectural Record, architects working on multifamily projects detailed some of the new amenities they’re providing to help residents feel safe. They include:

  • Elevators that residents can summon using mobile devices
  • More accessible stairwells
  • UV lighting to kill germs
  • More open-air spaces
  • Air exchange with the outdoors

Unfortunately, it’s going to take time to fully understand how these measures — as well as the pandemic and economic downturn in general — will affect the multifamily sector.

In an article on Biznow, Jim Gaines, Texas A&M Real Estate Center Chief Economist, explained, “The recovery at best is going to be an elongated U. A lot of the negative impacts, for example, the foreclosures and delinquencies, are not going to hit until the first and second quarter of next year.”

Key takeaways

  • While multifamily is one of the most reliable asset classes during a recession, it hasn’t fully withstood the impact of the pandemic’s economic volatility.
  • Multifamily properties are now offering new amenities aimed at helping residents feel safe.
  • We won’t know the full impact of the COVID-19 pandemic for six to eight months.