Challenges for Multifamily May Be Ahead, Yardi Matrix Reports

Rent growth has flattened and transactions slowed,
but collections and occupancy remained strong through July

SANTA BARBARA, Calif., July 30, 2020 – COVID-19 ended a decade of strong multifamily fundamentals and injected uncertainty and volatility that will affect the sector for months or years to come, according to a new seasonal market outlook from Yardi® Matrix.

Four months in,
the initial economic shock has subsided and economic implications have become
significant. More than 50 million Americans have filed for unemployment
benefits; the unemployment rate was 11.1% in June. Initial hopes for a
“V-shaped” recovery were overly optimistic, and experts now believe full
recovery won’t happen until the population is confident about health measures.

But although the
long run of multifamily rent growth has halted, expectations of calamity—such
as widespread non-payment of rents and loan delinquencies—did not occur. Rents
turned negative in the second quarter for the first time since the aftermath of
the global financial crisis. Over the previous five years, rents grew by an
average of 2% in every second quarter alone.

Though investment
activity dropped sharply in the second quarter, there are more investors seeking
to buy apartments than those looking to sell. Many investors are looking for
distressed and undervalued properties. Multifamily is likely to face a lesser long
term impact, as many investors prefer the long-term demand fundamentals
compared to other real estate investments.

All development
activity has now been significantly impacted by COVID-19. The pandemic has
weakened the supply pipeline and will delay projects that have not yet broken
ground. “We have reduced our initial forecast for 2020 deliveries to 250,000 units,
down from the 320,000 units we projected at the beginning of the year,” states the report.

As the virus remains
active and federal stimulus funds expire, the second half of the year could be difficult
for the apartment sector. To find out what’s ahead, download the Yardi Matrix U.S. multifamily outlook
for summer 2020.

Yardi Matrix offers the industry’s
most comprehensive market intelligence tool for investment professionals, equity
investors, lenders and property managers who underwrite and manage investments
in commercial real estate. Yardi Matrix covers multifamily, student housing,
industrial, office and self storage property types. Email [email protected], call 480-663-1149 or visit yardimatrix.com to learn more.

About Yardi

Yardi^® develops and
supports industry-leading investment and property management software for all
types and sizes of real estate companies. Established in 1984, Yardi is based
in Santa Barbara, Calif., and serves clients worldwide. For more information on
how Yardi is Energized for Tomorrow, visit yardi.com.