While real estate asset classes like retail and hospitality face exceptional headwinds, it’s likely that COVID-19 and the subsequent global lockdown won’t have as dramatic an effect on the multi-family housing industry. Despite short term issues, long term fundamentals remain healthy and are bolstered by a significant drop in construction starts.
On a recent webinar hosted by Juniper Square, representatives from leading multifamily housing ownership groups said that business is holding up, with collections over 90% for April. Virtual tours are enabling new leasing. Existing leases and loans are getting renewed, and transactions underway are proceeding. Fortunately, these companies have been able to keep staff employed, although they have made changes in how they work to enhance their teams’ safety, including expanding their use of technology.
For the frontline employees – leasing office teams, maintenance crews, etc. – their job is “harder today than it has ever been,” said Steven DeFrancis, CEO of Cortland, a multifamily owner based in Atlanta with around 60,000 units across the US.
They usually don’t have 100% of residents staying there 100% of the time. This adds extra stress on the property and extra stress on the team.
DeFrancis joined Govan White, Managing Partner at Nashville-based Covenant Capital Group, and Doug Bibby, president of the National Multifamily Housing Council (NMHC), to discuss “Managing Multifamily Assets in the time of COVID-19.” (Webinar replay below.)
While operations have become exponentially more dynamic over the past couple months, business has been relatively normal, panelists agreed. Both companies proactively reached out to tenants to get ahead of problems.
Government, Bank Aid will Help
Bibby said the CARES (Coronavirus Aid, Relief and Economic Security) Act did little for the housing industry, other than some language around forbearance. Real estate companies are not eligible for the Act’s support to small businesses. The NMHC is working with legislators to ensure that the multifamily industry receives a more appropriate level of support in the next phase of stimulus.
One thing keeping Cortland and Covenant optimistic about collections over the coming months is the fact that many residents are receiving, or are expected to receive, adequate unemployment assistance.
“It could definitely change depending on how much longer this goes on, but our hope is that the part of the CARES Act that is enhancing unemployment will be able to cover our customers’ rent in the short term,” DeFrancis said.
Automated Processes Helping Reduce Strain
Panelists pointed to the emergence of technology and improved workflows across multifamily operations as a saving grace at this time. Tools like FaceTime and Zoom are helping leasing offices give virtual tours and back-end software is keeping departments on track even when a significant amount of employees are working from home.
This industry has never been quick to adopt new technology, but as a result of the current situation and out of necessity we’ve been forced to adopt online leasing and other tools, and that’s going to have a very meaningful outcome.
Both panelists agreed that useful new technology is here to stay, which may change workflow permanently.
Outlook Remains Positive
While the economic outlook is cloudy, the multifamily housing industry appears to be relatively resilient.
“Multifamily housing has outperformed everything since this downturn hit,” White said. “Maybe not gold or silver, but certainly the stock market and oil and gas.”
He said the outlook is not all doom and gloom, as many are suggesting. One long term result of this may be that the many people who fled the largest cities for the shelter period will want to stay where they now are. This would be a win for secondary cities nationwide.