The Current State of Multifamily Properties Amid COVID-19
The worldwide Coronavirus pandemic has impacted nearly every aspect of our economy, including the multifamily real estate sector. As we head into the latter half of the year, how are multifamily property owners and property managers faring under increasingly difficult circumstances?
Occupancy Rates for Multifamily Properties Amid COVID-19
The pandemic’s economic slowdown has negatively impacted every real estate sector. As unemployment numbers continue to rise across the country, some commercial real estate sectors – namely retail and office buildings – are struggling to make ends meet. However, the multifamily sector seems to be weathering the Coronavirus storm better than other commercial real estate types. Even with unemployment at historic highs, it seems the current stimulus programs are enough to help most families stay in their homes.
As of July, just over 93% of apartment renters had paid their lease for the month. While that is a 2% decrease over the same period last year, it is holding relatively steady. That’s excellent news for property owners and property managers, who largely continue to collect payments and avoid evictions or missed mortgage payments of their own.
In addition, it seems that the global health crisis is also causing many renters to reconsider moving. The apartment turnover rate is at its lowest level in more than 20 years. Last year, the turnover rate was about 47%, but this year the average is just above 42% as more renters decide to stay put. Therefore, property owners see steady occupancy rates and steady monthly income.
New Multifamily Construction
While builders were uncertain about how new projects would continue amid the Coronavirus pandemic, most new construction has mostly gone ahead as planned. Some construction firms across the U.S. experienced a drop in activity during Q1, but nearly a third report increased activity heading into Q3.
In fact, commercial real estate giant CBRE predicts Texas multifamily construction, ownership, and property management will continue to see a rebound in the latter half of 2020. While Texas markets saw a decrease in the first part of the year as the state saw shutdowns, the slowdowns should stabilize later this year. Texas multifamily properties saw a decrease in new leases. Still, just like other areas in the country, Texas also saw a lower rate of turnover, keeping property owners and property managers afloat. And while rents are down an estimated 1.5% from March to May, the Texas multifamily market is still faring better than other areas of the country.
CBRE predicts that Q3 could still be difficult for the multifamily sector as shutdowns, economic impacts, and uncertainty continue. And while industry analysts are hopeful that Q4 will see stabilization, the effects of the economic slowdown may continue for some time.
How Safe are Multifamily Properties?
One concern in the multifamily sector is the health and safety of residents. With so much still unknown about this virus, those living in multifamily properties are rightly concerned about the disease’s spread within their community. It appears that the concern is mostly relative to the location and condition of the property. For instance, low-income housing – particularly low-income senior housing – represents a significant risk for residents. In some areas, residents report non-compliance with mask regulations, cleaning procedures, and other steps to keep residents safe.
Of course, senior citizens are at the highest risk of infection from COVID-19. As such, property managers should pay particularly close attention to sanitation procedures and other safety measures to keep all residents healthy. However, all multifamily housing represents an increased risk of exposure. Common areas, hallways, elevators, and other high-use areas can spread the virus quickly. Therefore, the CDC recommends that multifamily property owners and property managers follow strict cleaning procedures to keep all residents safe.
Outlook for Multifamily Properties
COVID-19 may be around for quite a while. As we adjust to the “new normal” of our lives, the commercial real estate industry struggles to find its footing. Luckily, multifamily housing seems to be holding steady. Property managers continue to protect residents’ health and safety and find new and innovative ways to connect with both current and potential clients.
While multifamily construction may see a decline compared to past years, projects are expected to continue. Growth may be slower than we’ve seen over the past decade, but multifamily real estate may still prove to weather this storm better than other CRE property types.
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