Self Storage Continues to Soar Sep02

Self Storage Continues to Soar

The ongoing strength of the self storage industry continues to impress analysts from Yardi Matrix, the industry’s leading provider of real estate data. They presented a positive outlook for the sector in a webinar held Wednesday, Sept. 1. (View the recording.) Continued migration from all parts of the country is an ongoing positive for the industry. Street rates are up across the board, with all unit sizes, vintages and property ratings experiencing strong increases. Newer facilities and highly rated facilities, however, have seen their rates accelerate faster than competitors. “If people are moving anywhere, that’s a really good thing for self storage,” said Chris Nebenzahl, editorial director for Yardi Matrix. And Americans have been moving a lot recently – a Matrix estimate puts the amount of relocation at 6 years’ worth of moves condensed into a year and a half. But as the pandemic drags on, it has also been possible to pinpoint some of the additional reasons that demand for storage units, especially medium and large units, remains high. They include: As people transitioned to working from home or educating children at home, they used storage to remove furniture from their households to create space for those activities.Demand for socially distanced outdoor activities prompted the need for storage for vehicles like motorcycles, boats and ATVs. (Next year, Matrix will introduce reporting specifically on storage facilities that handle RVs and boats.)Both temporary and permanent moves prompted renters and homeowners to store items while relocating.Business use of storage units to aid with inventory management during a period of disrupted consumer behavior. Gateway markets, which were already seeing outbound migration pre-pandemic, saw the largest gaps between improved self storage performance and struggling performance of multifamily.  Between March 2020 and July of 2021, street rates grew 24 percent in Chicago while multifamily rents edged up just one percent. And in Manhattan, street rates were up eight percent while multifamily rents dropped nearly nine percent. As street rates continue to rise month after month, investors and owners are wondering how long these gains can last. In the near term, they show no signs of abating. “The demand is there. We are seeing record growth rates. This is an opportunity for the self storage industry to make hay while the sun shines, but we think this is going to continue for another 18-24 months,” Nebenzahl said. Learn more about the self storage industry’s success in the latest Matrix National Self Storage...

Opportunity Zones Jul29

Opportunity Zones

Federal tax reform enacted in December 2017 reduced or eliminated capital gains taxes for investments directed toward multifamily, commercial and self storage real estate located in more than 8,700 low-income “opportunity zones.” This source of capital was expected to seed startups, accelerate business expansions, create jobs, improve housing options and revitalize built environments in areas where about 35 million Americans live. A Yardi Matrix white paper published in 2019 noted that the zones initially appealed to “a new base of largely untapped investors” and offered value-add opportunities in “new markets that were thought to be too small or risky as investment strategies.” Many policymakers touted opportunity zones as a way to create jobs and lift up underserved communities and minority-owned businesses. Critics assert that the program lacks transparency and mostly helps well-heeled investors and developers. A year-and-half since investors joined the program in earnest (many waited until final Treasury Dept. regulations were released in December 2019), has the opportunity zone initiative fulfilled its promise? Expert opinion is split. The White House Council of Economic Advisors, for example, reported in October 2020 that the program had attracted $75 billion in new investments to distressed American communities, $52 billion of which wouldn’t otherwise have entered the zones, and increased private property values within the designated areas by 1.1%. This infusion of capital represented “a powerful vehicle for bringing economic growth and job creation to the American communities that need them most,” holding the potential to “lift at least one million Americans out of poverty [and decrease] the poverty rate in opportunity zones by 11%,” U.S. Department of Housing and Urban Development official Denise Cleveland-Leggett said at the time. Michael Novogradac, managing partner of Novogradac, a San Francisco-based professional services organization, says the program “has seen notable...

Rents Rise Nationwide Jul21

Rents Rise Nationwide...

Multifamily asking rents jumped an average of 6.3% year-over-year in June, the largest leap ever recorded by Yardi Matrix, a leading industry data tracker. The national average apartment rent increased $23 last month to $1,482, another record, and single-family home rents were up 11% year-over-year. “These are the largest year-over-year and monthly increases in the history of our data set,” said Jeff Adler, vice president of Yardi Matrix. Analysts point to increased household savings and government stimulus funding as factors that have kept the multifamily industry stable during the pandemic period, and now able to rebound as the economy improves. The newly released data is an economic indicator of post-pandemic recovery across the U.S. The largest increases were documented in the lifestyle apartment sector. Renters are also now returning to many gateway markets that saw outbound migration for most of the last year. A supercharged housing market is also pricing out some potential buyers, leading residents to remain in apartments. “Rent growth will not be able to continue at these levels indefinitely, but conditions for above-average growth are likely to persist for months,” Adler said. The increases reflect growth in what landlords are asking for unleased apartments. Renters renewing leases may also be seeing increased rents, but likely at lower levels. Migration is pushing up rents in Southwest and Southeast metros like Phoenix (17.0%), Tampa and California’s Inland Empire (both 15.1%), Las Vegas (14.6%) and Atlanta (13.3%). These metros were lower cost compared to larger gateway metros. Get more insight on the historic report. 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...

Single-Family Rentals Heat Up Jul20

Single-Family Rentals Heat Up

It’s been a great year for single-family rentals (SFR). Both the institutional single-family rental and build-to-suit segments have performed well despite the challenges of the pandemic. Influences on the single-family rental market One of the first notable booms in SFR followed the Great Recession. Families sought the benefits of homeownership, which include but aren’t limited to space, privacy and land. Simultaneously, they avoided a mortgage crisis and the responsibilities of home maintenance. Fast-forward a little more than a decade and SFR have surged in popularity again. Though there is no strong correlation between population density and viral spread, many Americans fled cities due to COVID-19. They relocated to less populated areas. Families that were priced out of homeownership as well as those who wanted to avoid its responsibilities rented homes in the suburbs and rural areas. The momentum of this trend continues as families savor the benefits of single-family living. Institutions are investing in single-family rentals SFR compose about one-third of the 46 million rental homes in the U.S. Traditionally, the majority of those rentals (nearly 98%) are operated by individuals and small businesses. We are currently witnessing a shift as investors with deeper pockets enter the market.   Institutions are heavily investing in SFR. More than $10 billion are scheduled to bolster the segment in the next several years. Industry powerhouses such as Lennar Corp and Greystar Real Estate Partners are investing at least $1 billion each. Newer organizations, such as American Homes 4 Rent and NexMetro are also major players in the built-to-rent sector. Rather than sifting through rental homes scattered throughout communities, renters will be able to enter entire neighborhoods of built-to-rent houses. Such communities compose nearly 12% of current single-family construction. The latest data on single-family rentals Though the pandemic contributed to the growing success of the sector, SFR aren’t a pandemic-dependent trend. Since 2016, SFR rent growth has exceeded that of conventional multifamily rentals. Through mid-year 2021, SFR had improved to 6.4% nationally. Occupancy rates were at 94.3% nationwide. Though rents are performing well overall, secondary and tertiary markets have experienced the greatest growth in the last two years. There are currently more than 12,200 SFR units under construction in 50-plus unit communities. More than two-thirds are being constructed in secondary markets. The remaining are in tertiary markets. Yardi Matrix reports no SFR communities are under construction in gateway metros. The Southwestern region leads in construction with 4,896 units followed closely the Southeast with 3,978. Phoenix is home to the most existing SFR in communities with more than 50 units (about 6,000). It is also where most construction is taking place, a 2,500-unit slice of the 12,200 built nationwide. Jacksonville, Charlotte and Houston each have about 700 units under construction, with Atlanta expecting 544 units. The Midwest pipeline consists of 1,716 units and the West reports 1,522 units. The Northeast lags with 132 units. Single-family rentals demonstrate staying power SFR have been a growing segment of the rental market since 2009. The surge in built-to-rent homes indicate that investors are committed to the benefits that they are receiving. They have the ability to control their brand and the renter experience from start to finish. They can also focus on a large number of holdings in fewer locations. Analysts propose that investors will enjoy improved liquidity, since there are more potential market participants with single-family construction. Download the complete Yardi Matrix single-family rental...

Single Family Rentals Jul08

Single Family Rentals...

Is there a market for renters who want it all? Privacy, outdoor living space, a manicured lawn and financial flexibility are available to renters of single-family homes. Research reveals that interest in single family rentals has been growing since the Great Recession. The pandemic further ignited demand, as demonstrated by a surge in the construction of single-family rentals. As the market develops, specialized technology is necessary for smart growth. Industry powerhouses set their sights on single-family rentals   In mid-2020, the first wave of institutional buyers made their mark on the industry. During Q1 2021, they continued the trend by purchasing nearly 55,000 homes, according to Redfin data. Built-to-rent single family homes are also taking off. New York-based Trepp real estate analytics firm reports a 66% increase in single-family homes built to rent. Both homebuilders and apartment companies are entering the market. Builders such as Lennar Corp., the largest homebuilder in the nation by revenue, and multifamily behemoth Greystar Real Estate Partners are investing in single-family houses. Mike Clow, executive director at Greystar, aims to increase investment in the division by a noteworthy 1,566.66% percent by 2026. Operator Invitation Homes announced that it will spend $1 billion in single-family home acquisition in 2021, per an interview with Business Insider. While major players are pumping major dollars into the sector, small landlords still own the majority of single-family rentals. Only about 6% of new homes are built-to-rent.   Single-family rental data by Yardi Matrix The demand for single-family rentals is reflected in the strength of rents and occupancy. Yardi Matrix reporting now includes insights into built-to-rent single-family communities. Data is compiled from more than 90,000 units in 700 communities nationwide. Single-family rentals (SFR) thrived during the pandemic. The industry recorded a powerful 7.3% year-over-year (YoY) rent...

Rent Relief Success Jun25

Rent Relief Success

Emergency rental assistance funds are helping Connecticut residents maintain housing thanks to a successful launch of the UniteCT program. UniteCT is administered by the State of Connecticut Department of Housing and runs on technology from Yardi called Rent Relief. UniteCT is funded by $420 million in grants for rent and electricity payments for households impacted by the COVID-19 pandemic. Fifteen state, county and city government agencies use Rent Relief to administer more than $1 billion in emergency rental assistance funds. Over 158,000 users are registered on Rent Relief and have completed more than 57,000 applications. With Yardi Rent Relief, UniteCT accepts applications for assistance from residents and landlords using an online portal that is accessible from computers and mobile devices. The flexibility of Rent Relief paired with the efforts of the UniteCT team delivers assistance in areas that would have been otherwise been underserved. ”The UniteCT bus is an exciting new solution to combat the digital divide in communities who need additional support with technology. We are reimagining the rent relief application process by going to the individual and setting the precedent for other programs to come,” said Marina Marmolejo, program manager. (Bus pictured at right.) The success of Rent Relief’s implementation of UniteCT can be measured by how fast Yardi launched the online application portals and how quickly case review team members became trained to begin vetting fully submitted applications. Other signs of success include how many applicants have used Rent Relief thus far without major interruptions in service. Users created more than 10,000 accounts within the first few days of the applicant portal going live. “We continue to do a lot of multi-media outreach including radio, newspaper articles and social media.  We have created sixteen UniteCT Resource Centers throughout the state to...

Recovery Gains Jun15

Recovery Gains

As the U.S. economy continues to show recovery gains, multifamily housing follows suite. Several factors including prevalent industries, vaccination rates and employment create a distinction between markets with rapid growth and lagging gains. Need-to-know data, quick and easy Multifamily rents increased by 2.5% year-over-year (YoY) in May. This nearly reflects rent growth rates of March 2020, before the development of pandemic trends.  For the second consecutive month, all top 30 metros showed positive month-over-month (MoM) rent growth. An impressive 90% had MoM gains of 0.5% or more.Rents grew $12 in May to $1,428. That’s the largest one-month increase in Matrix history. The 0.8% MoM growth rate was the largest since June 2015.Rents increased nationally by 0.8% in May. Of our top 30 metros, 22 demonstrated positive YoY rent growth this month. Run, walk, and crawl: metros demonstrate growth at different rates Some rents grow at a sprint. YoY rent growth reached double digits in the Inland Empire for the first time in recorded history. Rent growth in the Inland Empire clocked in at 10.2% followed by at Phoenix 9.6% and Sacramento at 8.3%. Gateway markets have found a comfortable stride. Miami reports a respectable 6.0% growth, the strongest in the region. Others are crawling or have yet to budge, though all signs point to improvements soon. Chicago with 0.0% growth and Los Angeles at -0.1% are still better positioned than San Jose (-9.0%), New York (-8.8%) and San Francisco (-6.7%). Introducing single family rental data Matrix reporting now includes single-family rents within built-to-rent communities. Data is compiled from more than 90,000 units in 700 communities nationwide. Single-family rentals (SFR) thrived during the pandemic. The industry recorded a powerful 7.3% YoY rent growth as of May. This reflects an overall rent increase of about $14...

National Outlook May14

National Outlook

A new webinar outlined the continued success of the industrial real estate sector and ever-evolving picture for the office market. The May 13 presentation was hosted by Yardi Matrix and CommercialEdge. Insightful detail from the presentation is available on both CRE market segments as well as regional breakdowns. Find the full recording at yardimatrix.com Strong fundamentals continue for industrial Yardi Matrix vice president Jeff Adler had nothing but positives to share about the state of the U.S. industrial sector. Durable fundamentals for both supply and demand indicate that industrial will be a strong investment well into the future. “I’m really not concerned that this is some kind of bubble,” Adler noted, as the available supply and new development of industrial properties can barely keep up with current demand. As a result, rents are performing well, especially in coastal markets, and vacancy rates across the nation are low. E-commerce continues to be a major contributor to industrial’s success, but the backbone of the industry is general goods distribution and small-scale manufacturing. E-commerce won’t have the same double digit increase it did in 2020 due to pandemic activity constraints, but demand is expected to remain consistent. Consumers learned to rely on direct ordering during the pandemic, Adler noted, and can save time by continuing such shopping habits. Major ports and large population centers lead the industrial rent growth list, with California’s Inland Empire in the No. 1 spot and Sacramento at No. 2. But smaller markets have the highest percentages of industrial supply under construction, led by Amarillo, Little Rock and Albuquerque. Nationally, the amount of new industrial space in the pipeline is not expected to disrupt rent gains. Adler anticipates industrial has about three years of runway for its continued strong performance. Yardi Matrix data...

Multifamily Picks Up May07

Multifamily Picks Up

The multifamily market is rebounding from the pandemic at a rapid clip, and gateway markets are now seeing positive performance indicators for the first time in many months. The latest Yardi Matrix Multifamily National Report has much good news for owners and investors, including a 1.6 percent year-over-year rent bump. “That is the largest increase that we have seen since the beginning of the pandemic,” said Matrix analysts. Overall rents increased by $10 in April to $1,417. The last time overall rents increased by that amount in a month was June 2015. It was also the largest year-over-year jump since March 2020. Out of the top 30 markets Matrix reported on, 24 had month-over-month rent growth greater than 0.5%. Of particular significance were the gains in gateway markets. Miami leads the gateway markets with 0.8% rent growth on a trailing 3-month basis. All other gateways had positive trailing 3-month rent growth, with Chicago (0.5%) and Boston (0.4%) showing strong gains. Washington, D.C. (0.2%), New York, San Francisco and Seattle (all 0.1%) are further back in the recovery process. “We expect the gains in these markets to strengthen as we head into the summer,” states the report. Find more good news and in-depth analysis for multifamily from Yardi Matrix. 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...

Apartment Investment May07

Apartment Investment

Jeff Adler, vice president of Yardi Matrix, was recently featured as a guest panelist on an NMHC virtual forum. The April 20 focused on apartment investment, trends and economic factors affecting the industry. Adler appeared alongside Jim Costello, senior vice president at Real Capital Analytics, and Suzanne Mulvee, senior vice president of research and strategy at GID. The conversation was moderated by Dave Borsos, vice president of capital markets at NMHC. Markets like Portland, Oregon have seen an influx of residents as rising single family home sales over the last year. All three industry experts were bullish on the state of the multifamily industry, which is already well on its way to recovery from the impact of the COVID-19 pandemic. “As it relates to multifamily, it is game on,” said Adler. “(Investors) are out there buying and rents are up. There are pockets of weakness in the urban gateway but if you look south and west, there are a lot of people bidding with a lot of cheap (capital). There are a lot of people moving out of office investments and into industrial and multifamily.” The economy and inflation risk With many Americans flush with cash, both from saving during the pandemic and stimulus funds from the federal government, spending is rampant and economic growth is expected to be around 6.5 percent for 2021, Mulvee noted. But with those conditions comes a concern about potential inflation. “We know we are going to see a period of six months or so of inflationary pressures,” Adler said. “But we hope that in six to nine months, there will be enough deflationary counter pressures that it won’t get out of hand. That in my mind is the bigger issue.” Costello, who writes extensively on market conditions, tempered...

Multifamily Outlook Apr15

Multifamily Outlook

The economy is recovering quicky after severe impacts from pandemic shutdowns over the last year. That was the top line good news from Thursday’s webinar on the multifamily industry, presented by Jeff Adler, vice president of Yardi Matrix. The recovery timeline is expected to be around 18 months. “The economy is heating up as the job market strengthens,” said Adler. “A recovery in gross domestic product is clearly under way. I would liken this to a shot out of a cannon.” Inflation is a short-term concern, however. Hear the full analysis and insight in the webinar recording. Rents are on the rise across the country, and that’s a positive indicator for the industry and the economy at large. Multifamily rents increased by 0.6% on a year-over-year basis in March, with the national average rising by $6 to $1,407. Out of 134 markets surveyed, 114 had flat or positive YoY rent growth. Impacts vary, however, across states and cities. Gateway markets like Boston, Chicago, Miami, New York, San Francisco and Washington D.C. appear to have now hit bottom in rents and are positioned for gradual recovery. Leading the way in March’s rent increases were affordable cities and suburbs in the West, with the Inland Empire (8.3%), Sacramento (7.3%) and Phoenix (6.9%) leading national tallies in year-over-year rent growth. “It will take several years for gateway markets to recover, under the best of circumstances,” said Adler. “There has been just as much movement within metro areas at about a 30-40 mile radius. People are moving out of the urban core and into surrounding suburban areas. That’s a meaningful amount that will make coming back to the office problematic, but they aren’t detached from the metro area entirely.” Single family rentals and the build-to-rent sector have also...

NAA Digital Studio

Do you want to emerge from 2021 with a more efficient, agile and profitable organization? Discover insights to help you reach your goals during the National Apartment Association (NAA) Digital Studio Series! Stronger NOI in 2021 The April NAA Digital Studio, presented by Yardi, is a half-day event including deep dive and interactive sessions, industry panels, networking and more. This month’s theme is “Stronger NOI in 2021: Where do we grow from here?” Experts from leading multifamily companies across the country will discuss the many ways in which COVID-19 has impacted the real estate industry and, more specifically, apartment management. Each session features unique programming that tackles common industry challenges. Through the sessions, you can: Explore market changes and projected financial impacts to help you plan smarter in 2021 and beyond. Gain insights from multifamily leaders who will share new performance metrics they’re using to change the way they do business. Discover ways to improve net operating income beyond rent increases. Featured speakers include guests from Luma Residential, Bell Partners, BH Management Services, Cirrus and more. Industry professionals focused on operations, marketing, technology and related roles will walk away with practical, actionable items to strengthen your organization. Work + play The event kicks off with keynote speaker Jeff Adler, vice president of Yardi Matrix, offering an engaging look at the latest multifamily data. Examine changes in rent growth, occupancy, retention and renter preferences over the last 12 months. Learn how new demographic patterns have affected top and bottom markets. Attendees will also see rent and occupancy forecasts for a variety of property groups. Then, stick around for additional sessions that connect the market update to real-life experiences and plans to protect NOI going forward. End the day with a relaxing musical interlude. Leslie and...

Smooth Sailing for Self Storage Mar26

Smooth Sailing for Self Storage

As Americans continue to move about the country in the aftermath of the COVID-19 pandemic, they’re often downsizing, temporarily relocating, or electing not to take all of their possessions along with them. The exodus of renters from high priced gateway cities has been beneficial for the self storage market, and Yardi Matrix vice president Jeff Adler is carefully confident that strong demand for storage units will continue for the next 18 to 24 months. “I’m cautiously optimistic, but wouldn’t say wildly optimistic, about the sector near term,” Adler said during a Self Storage National Outlook webinar presented on March 24. The webinar also included an overview of the national economy, potential for inflation, employment trends and other factors. It’s available to view online. For the next few months, renters may be moving back to cities that they left a year ago to resume in-office employment or making final decisions about whether to stay in a new city they tried out while escaping an urban lifestyle in 2020. Those moves will likely impact storage positively. Although vacancy across the country’s largest office markets continues to inch upwards compared to Q1 2020, increases in office sale and rent prices show investors have not lost any confidence in the strength of both traditional and up-and-coming markets. For example, the latest national office market report released by CommercialEdge found that, despite pandemic challenges, Nashville saw a year-over-year increase of nearly 6% in office lease rates, which rested at $31.06 per square foot — coming up closely behind San Diego office space, which averaged $39.44 per square foot, following a modest increase of 0.8% compared to February 2020. Self storage demand could be further bolstered if there is a second wave of moves out of higher-cost real estate markets, Adler shared. Such moves will be contingent on employment trends as the country recovers from the year-long pandemic. So far, migration is flowing from California to states like Colorado, Texas and Arizona, and out of New York to states like Florida and North Carolina. Utah and Idaho are also experiencing a high volume of new residents. “As long as there is movement of people, storage tends to do quite well. Continuing moves would keep the demand for storage high,” Adler said. But at some point, pandemic-influenced demand is expected to subside. National street rates for 10×10 non-climate-controlled (NON-CC) units increased by 2.6% compared to February 2020, and rates for 10×10 climate-controlled (CC) units grew by 3.1% over last year. While street rates nationwide saw substantial growth year-over-year, rates for both unit types remained flat month-over-month. Along with the industrial sector, self storage is a bright spot for real estate investors. Focused on short-term returns, however, they are mainly electing to purchase existing properties rather than sink time into ground-up development. Deal velocity picked up at the end of 2020 and 2021 is expected to be a record year for self storage transactions. “Relative to industrial, which is very pricey, and other asset classes, self storage as an investment class is very attractive and that’s driving a lot of institutional investor interest,” Adler said. Consistent street rate performance and ease of management are both positives for investors. The only downside for some markets is large supply pipelines, which could push down prices as they come online. Nationwide, Yardi Matrix tracks a total of 2,237 self storage properties in various stages of development: 597 under construction, 1,201 planned and 439 prospective properties. The national new-supply pipeline as a percent of existing stock increased 0.1% month-over-month in February, and the share of existing projects in planning or under construction stages accounted for 8.4% of existing inventory. Matrix also maintains operational profiles for 26,534 completed self storage facilities across the United States, bringing the total data set to...

Project Destined Mar10

Project Destined

Project Destined is an organization focused on providing education and access to the commercial real estate industry for minority students. Programs are targeted towards high school and college students, with the goal of introducing real estate ownership to people who may not have previously studied or worked in the commercial real estate industry. Yardi Matrix has provided 10 complimentary education licenses to Project Destined for use in their curriculum and internship programs. Students will have full access to Yardi Matrix’ industry-leading data and analysis to use when researching, underwriting and presenting potential deals to their teachers, industry mentors and competition judges. Chris Nebenzahl, editorial director for Yardi Matrix, has been actively involved with Project Destined. “I have been volunteering to teach the market research segment of the curriculum and offer guidance for how students can use Yardi Matrix with the projects they are working on,” said Nebenzahl. “I focus on our data at the property, submarket and market level. The students are tasked with creating an investor presentation and pitching their deal to a panel of industry judges. Through the process, they need to provide valuation models, market research, forecasts, and cash flow models, all of which can be developed and leveraged by using Yardi Matrix data.” Nebenzahl began working with Project Destined in early 2020 and has lectured virtually at each session held by the organization since then. Project Destined was started by entrepreneur Cedric Bobo to expand opportunities for minority students within the commercial real estate field and to encourage his students to become owners and community stakeholders in the cities where they live. Project Destined started 5 years ago and has grown significantly to include students in many major markets around the country. Bobo, who grew up in Memphis, was fascinated...

Student Housing Slows Down Mar03

Student Housing Slows Down

Yardi Matrix vice president Jeff Adler presented a look both forward and back for the student housing sector in a webinar held Wednesday, March 3. (Find the presentation materials and recording here.) Despite the challenges of the pandemic over the last year, the sector has held up relatively well. Rents are still increasing – but just slightly. Year-over-year rent growth was 1.3%, with Class B assets taking a larger hit than Class A or C housing. Adler remains very positive on the student housing space, even though preleasing is currently behind its usual pace for Fall 2021. “We do expect the 2021 term to have a surge in enrollment and preleasing activity, but it will probably come late, in April and May, as the vaccine situation clarifies,” he said. That was just one of many insightful takeaways from the presentation. Yardi Matrix produces a quarterly student housing report that summarizes leasing, rent rate, transactions and other trends. The student housing data set includes over 2,000 universities and colleges nationwide, including the top 200 investment grade universities across all major collegiate conferences. Known as the “Yardi 200,” it includes all Power 5 conferences as well as Carnegie R1 and R2 universities. Schools that have fared best with housing over the last year have been those that are not urban or in states with strict COVID restrictions in place, Adler said. Overall, national university enrollment is down 2.5% this year from a year ago. Currently, preleasing of student housing for Fall 2021 is trending four percent below where it was last year at this time. Preleasing for Fall 2020 ended up five percent behind 2019 numbers. “Large, first tier institutions have done the best, and the top performers are those that have been in states and localities that were open for business (throughout COVID),” said Adler. Universities that have preleasing off to a good start for the upcoming fall term were major public universities in remote areas and some universities near smaller downtowns. That includes schools like Case Western University, the University of New Hampshire-Main Campus and University of Pittsburgh-Pittsburgh campus, which are leading the way as top preleasing performers for Fall 2021. Schools that are falling behind on preleasing include the University of Illinois at Chicago, Brigham Young University and the University of California at Santa Barbara, which are all lagging far from their normal preleasing numbers. As a result of the pandemic, housing providers are seeing higher demand for studios, single bedrooms and bedrooms with their own personal bathroom, Adler said. “Those without bedroom/bathroom parity are struggling (to lease). This may be an issue that continues, where you would have to have very significant discounts to overcome people’s desire not to share a bathroom.” The desire for personal space will also impact on-campus student dorms, which may have to rethink double and triple occupancy situations due to parent and student concerns. “I’m bullish about the whole sector, because dorm capacity just doesn’t work,” Adler said. It also doesn’t seem to matter whether schools are offering fully in-person learning, a hybrid model or all virtual classes. The school simply needs to be open for business in order for student housing demand to remain strong. “Our data showed that they wanted to get out of the house (in 2020) and they did.” Development trends in student housing reflect what life will look like post-pandemic. High performance Wi-Fi, always a must, has become even more important. Apps that allow students to submit maintenance or service requests are trending, as are outdoor/open spaces where students can gather in person. And touchless features, like keycards for building entry or elevator operation, will be more prevalent. Development of new student housing stock is primarily focused in the south and southwestern U.S. and has not been deterred by the pandemic. Investment opportunity in the sector remains strong. Highlights include: Global Student Accommodation Group (GSA) made its...

Multifamily Outlook Jan26

Multifamily Outlook

After a year ravaged by disease, division, job losses and economic hardship, expectations for the multifamily industry in 2021 are the subject of a new Yardi Matrix outlook. “While there does appear to be light at the end of the tunnel, it will take some months to get most of the country vaccinated and get businesses operating as normal,” states the report. Job growth has been mostly positive since the summer, but the economy remains nearly 10 million jobs off its peak. Millions of renters continue to struggle to make monthly payments. The $900 billion stimulus package passed at the end of 2020 provided some relief, especially the $25 billion renter assistance, $25 billion for Housing and Urban Development (HUD) programs and $300 per week supplemental unemployment. “However, another package is likely to be needed in 2021 to keep many families and property owners afloat,” the report’s authors opine. Nationally, rent growth fell only slightly in 2020, but there was a huge variation among metros. Rents and occupancy levels fell sharply in high-cost gateway markets, as renters left crowded and expensive coastal centers. More affordable markets in the Sun Belt, Southwest, Midwest and Mid-Atlantic saw modest rent growth. In 2021, the expectation is that gateway markets will continue to struggle, and the industry will have to deal with weak rent collections, eviction bans, forbearance requests, lobbying for renter aid and new federal mortgage oversight protocols. Despite the challenges, capital flow remains strong. Sales activity dropped about 35% in 2020, but investors are still looking to buy apartments. Agency lenders have had their allocations clipped slightly, but debt availability is also strong. Construction has slowed, with less than 300,000 deliveries in 2020. With more than 750,000 units under construction now, new supply should stay in...

2021 Outlook Jan12

2021 Outlook

For more than 40 years, PwC and the Urban Land Institute have produced a trends and forecast publication. The 2021 edition of Emerging Trends in Real Estate summarizes views gathered in interviews and surveys of more than 2,950 property owners, investors, fund managers, brokers and others in the U.S. and Canada. COVID-19 dominates virtually every examination of real estate, and Emerging Trends is no exception. Yardi Matrix reported, for example, that multifamily property sales through the third quarter were down more than 41% from the same period the previous year. Meanwhile, 33% of office-space decision-makers participating in a study sponsored by BOMA International, Yardi and Brightline Strategies reported experiencing at least a 25% revenue decline since the pandemic’s onset. Here are some highlights from the 111-page PwC/Urban Land Institute report: “COVID-19 has kicked real estate certainty to the ground,” the publication says, with confidence in future demand for many property types having dropped precipitously in 2020. But technology has eased adaptation to the drastic measures prompted by the pandemic. Millions of office workers successfully transferred to remote environments, for example. The report notes, “The WFH experiment has gone better than most managers and employees had expected, since new teleconference tools and advanced information technology systems have allowed for effective communication and collaboration.” Many who contributed to the report predict that measures adopted during the pandemic will continue when workers return to the office, including flexible hours, reduced shared spaces, ongoing enhancement of building environmental systems, and physical barriers. The report also speculates that some companies might consider abandoning the consolidated model of leasing and using office space in favor of a hub-and-spoke system with satellite offices. And, the report notes, “Significant opportunities to operate and manage buildings more efficiently are ahead as well,” as property management technology providers deliver solutions that “gather, organize, and use data to reduce costs, identify risks, and more proactively operate buildings; identify appropriate investment strategies; and better serve tenants.” Property owners are also likely to continue making investments in technologies that strengthen cybersecurity, ensure business continuity and assess a building’s compliance with heightened health standards. With companies increasingly focused on controlling costs, those investment will most likely target immediate critical necessities. Tech is also driving profound changes in the multifamily sector. The report quotes an unidentified major apartment landlord: “The pandemic changed how people lease apartments. Online tours and processes are now preferable, and while some reversion to in-person tours may occur, we believe that online interaction will be acceptable in most cases. Reluctance to adopt technology is a key challenge, and COVID has been an opportunity to change that.” Demand for smart-home technology such as touchless controls on sinks, motion sensor lights and voice commands also figures to increase, the report says. Yardi continues to dedicate special resources to help clients, employees and communities weather the COVID-19...

Status of Storage Dec21

Status of Storage

Confidence in self storage remains high as the sector demonstrates ongoing strong street rate performance despite COVID-19’s continued impact across the U.S., reports the latest Yardi Matrix National Self Storage Monthly report. National street rates for standard 10×10 non-climate-controlled (NON CC) units increased 1.7% last month compared to November 2019. While year-over-year street rates nationwide for 10×10 climate-controlled (CC) units did not increase, the flat performance reflects an improvement over the first nine months of 2020. From October to November, national street rates for 10×10 NON CC units also saw an increase of 0.9%, while nationwide rates for similar-size CC units remained unchanged. Annual street rate performance was negative in only about 19% of the top markets tracked by Yardi Matrix for 10×10 NON CC units in November. Rates for this unit type were hit the hardest in Minneapolis, which saw a 3.5% decrease year-over-year. Experts caution that despite several months of rosy reports, there still could be challenges ahead. “While self storage has established itself as a strong performer in difficult market conditions, it could face a tough slog ahead as another round of COVID-related lockdowns and restrictions emerges this winter,” states the report. Nationwide, Yardi Matrix tracks a total of 2,136 self storage properties in various stages of development—comprising 590 under construction, 1,134 planned and 412 prospective properties. The national new-supply pipeline as a percent of existing inventory increased by a minor 0.1% month-over-month in November, and the share of existing properties in various stages of development accounts for 8.3% of existing inventory.  Yardi Matrix also maintains operational profiles for 26,351 completed self storage facilities across the United States, bringing the total data set to 28,487. Read all the highlights for self storage in the latest National Self Storage Monthly...

Employment Impacts Dec03

Employment Impacts

The COVID-19 pandemic has been inconsistent in the way it has affected the U.S. employment market, creating a wide disparity between metro and job segments. This is the main conclusion of the latest special employment report from Yardi Matrix. Leisure and hospitality was by far the biggest employment sector loser, with 3.8 million jobs lost. In contrast, only 1.8% of the jobs in financial services have been lost since the start of the pandemic. However, the overall impact varied greatly depending on the city. Metros with the best job performance include those with relatively small leisure and hospitality industries and those that have lost relatively few jobs in the segment (Indianapolis, for example, lost only 6.5%). One outlier, Austin, has added 8,200 professional and business services jobs and 7,300 financial services jobs since February. While the size of a metro’s leisure and hospitality segment is a key in the extent of job losses, a more significant factor is how thoroughly the metro shut down to stop the spread of COVID. Few of the top 10 metros in the percentage of jobs lost since February are among the leaders in leisure and hospitality jobs, but all are at or above the average proportion of jobs lost in the segment. New York City, for example, has a relatively small leisure and hospitality segment (9.8% of all jobs), but a whopping 42.3% of those jobs disappeared. “The data does show hope for the future for the gateway metros that have been hard hit, because the core industries in those metros, such as finance and professional services, remain viable,” states the report. “Once a vaccine is available and people feel safe going back to entertainment venues, restaurants and the like, gateway cities (like New York, San Francisco, Boston...

Opposite Outlooks Nov12

Opposite Outlooks

It’s a tale of two outlooks for the industrial and office real estate sectors, reported the experts from Yardi Matrix and CommercialEdge in a commercial real estate webinar presented on Nov. 11. As the end of 2020 nears, each market has a different trajectory. For owners and investors in the office sector, the full impact of the pandemic and its impact on the way employees work, especially in the knowledge and technology sectors, has yet to be unveiled. Major office properties tend to operate on long leases, so while rent remittance has been generally solid this year, as leases come to term in 2021 things could change. The big question, said Yardi Matrix vice president Jeff Adler, is what use of office space looks like in the future. One thing 2020 has taught us is that it likely doesn’t look like the old model of spending five days a week in a cubicle. “There is a re-evaluation of ‘what is the purpose of space?’ Was the purpose of that space that people got things done there? Or was it a culture purpose? If it was simply to do a task, it’s become clear that task can likely be done at home. How space is used, why space exists and why you need it in the first place is going to be reimagined,” Adler said.  “What kind of office footprint do you actually need to achieve the business goals that you have?” The answers to those questions will determine the floorplans and lease terms of offices post-pandemic. Also at play: where they’re located (public transit use is still dramatically decreased) and how many workers will come to the office on any given day. Right now, going back to a 5-day office work week seems highly...