With the U.S. economy in a recession, unemployment numbers sky high and COVID-19 cases surging in the south and west, multifamily owners and operators face challenging times ahead. And things may get worse before they get better, according to a new special report from Yardi Matrix. The report is based on a study of 107 major metros, with data reflecting April and May 2020 asset performance. Over that period, multifamily asking rents dropped .4% nationally, and twice as many markets saw rents decline as opposed to increase. Renters are looking for less expensive units, with the biggest impacts in the sector felt by Class A+ properties. Rents for “luxury lifestyle” properties dropped by -1.2% over the last two months, compared to a decline of .5% for “renter by necessity” properties. “Multifamily’s nearly decade long run of healthy performance increases came to an abrupt and unexpected end this year,” said Jeff Adler, vice president of Yardi Matrix. “Job losses have been particularly high among apartment renters, and simply collecting rents and maintaining occupancy is a new area of focus for owners and managers.” Multifamily had a long run of strong performance – asking rents grew by 26% nationally between January 2015 and 1Q20. But going forward, the future looks cloudy at best. “The shape of the recovery remains unclear. More importantly, the pandemic is spurring changes in working conditions and social trends that will impact housing demand for years to come,” states the report. What’s ahead will be determined by a complicated combination of economic factors, public health metrics and renters’ feelings about the future. If renters decide to eschew urban apartments for a more distanced standard of life in the suburbs or smaller cities, multifamily could be in for a prolonged pain period. Gain...

Each week’s news seems to bring a new wave of devastation for the U.S. employment market, as unemployment claims continue to climb due to the COVID-19 pandemic. The national unemployment toll was 36.5 million jobs lost when this was written – by the time you read it, that figure will likely be higher. Yardi Matrix® dove into the unemployment data to find out which sectors and geographic regions are hardest hit, which will hold up and where the unemployed may want to look for their next opportunity. Unlike past recessions, job losses have not been spread across the economy. Layoffs and furloughs have been concentrated in segments most affected by shelter-in-place orders: retail, leisure, travel and entertainment, and jobs in which social distancing is difficult. Between February and April, leisure and hospitality jobs contracted by a jaw-dropping 48.1%, or 8.1 million workers. Other hard-hit segments include other services (-21.9%), a category that includes personal services and repairs, retail trade (-13.7%) and construction (-12.7%). The number of lost jobs has been higher among hourly, service-based workers than for career workers who more easily can work from home. On a proportional basis, job categories that shed the fewest jobs over the last three months are financial activities (-2.8%), government (-4.3%) and wholesale trade (-6.2%). Another segment that lost relatively few jobs was professional and technical services (-5.3%), which includes computer systems design services (-3.8%). “This report provides in-depth insight to the most durable employment sectors, both professionally and geographically,” said Jeff Adler, vice president of Yardi Matrix.  Find the full Durable Employment Sectors report from Yardi...

Self storage is still considered among the most stable real estate sectors during rocky economic times, but it is not immune from the COVID-19 crisis, attendees of the May 19 SSA Webinar presented by Yardi Matrix experts learned. “Under the best of circumstances, and short of a medical solution, recovery is going to be partial and slow,” said Jeff Adler, vice president of Yardi Matrix, at the start of the presentation. Adler and Chris Nebenzahl, institutional research manager for Matrix, presented the current outlook for self storage as it navigates changing tides. If you missed it, find the presentation materials and a recording of the session. While the industry looked strong in March, things shifted in April. National street rates for 10×10 non climate controlled (CC) units fell 2.6 percent, and rates for 10×10 CC units fell 6 percent. That was the largest decline in more than three years.   The impact was nearly universal, as street rates for non-CC units fell in 97 percent of the major markets tracked by Yardi Matrix, and CC units saw declines in every market tracked. Only Raleigh-Durham and Portland, Ore. saw non-CC street rates drop less than in previous months, and Phoenix stayed completely flat (see slide at left). Nationwide, Yardi Matrix tracks a total of 2,209 self storage properties in various stages of development, comprising 593 under construction, 1,172 planned and 444 prospective properties. Matrix also maintains operational profiles for 25,914 operating self storage businesses, bringing the total data set to 28,123. The COVID-19 crisis has yet to slow self storage development, however, as properties under construction or in the planning stages account for 9 percent of the market in April, a 20-basis-point increase over March. That’s expected to change in the coming months. “We expect...

Yardi Matrix continued its series of comprehensive market impact webinars on May 6 with an in-depth look at the state of the multifamily industry, presented by Jeff Adler, vice president of Matrix. “We are just beginning to see some of the ripple effects (on multifamily), and now the discussion has shifted to how we recover and move forward,” stated Adler at the outset of the session. Nearly 1100 real estate professionals tuned in for the 90-minute session. A similar presentation with a focus on the commercial real estate sector is set for Wednesday, May 13. You can register here. Attendees report that the Matrix webinars are invaluable for keeping a finger on the pulse of the rapid changes that continue to impact the industry. Here are some of the key takeaways from the multifamily impact webinar. Listen to the full presentation to see data points and comprehensive slides. So far, the multifamily industry is holding up well. April rent collections were excellent, only off a few single digit points from prior months, said Adler. It’s expected that trend will continue at least until August. Leasing season has resumed and many properties with availability are seeing more interest than expected, according to anecdotal reports from industry contacts. Data from Yardi’s RentCafe online leasing service shows a marked uptick in views of online apartment listings over the last month. The economic recovery is expected to be partial and slower in some states than others. This will impact all industries, and multifamily will likely continue to see household consolidation as renters move in with friends or family members to try to keep costs down. For new leases, concessions offered by owners and managers will be an important indicator of market performance trends going forward. Population trends will...

As multifamily real estate continues to adapt to new standards of social distancing and uncertain economic times, a longtime asset management executive sees signs of positive momentum for the industry. Greg Slang is executive vice president of asset management at KETTLER, a national recognized developer/owner/operator of multifamily assets in the Washington D.C. region as well as Florida and the Carolinas. With a portfolio that includes apartments in all asset classes from affordable to A+, Slang is positioned to observe the impact of the COVID-19 pandemic across property types and resident experiences. He recently sat down for an interview with Dhar Sawh, industry principal at Yardi, to speak about multifamily’s adaption to the changing times and KETTLER’s particularly swift response. You can listen to the full commentary here. Having worked through 9/11 and the Great Recession of 2007-2008, Slang provided an insightful look at the state of the multifamily industry from an asset management perspective. Among the topics covered in his interview: remote work, resident considerations during COVID-19, and what to look out for next. “This all happened very quickly,” said Slang. “It has been very difficult from a shock perspective. I liken it to 9/11, where one day all seems to be fine, and the next day, the whole world seems to be thrown into disarray.” Multifamily has reacted quickly to the social distancing circumstances required by COVID-19, incorporating the use of virtual tours, online leasing and other proactive measures. The only things that truly can’t be resolved remotely are major maintenance concerns. Slang said that the KETTLER team has reacted well to working remotely and is continuing to serve their residents effectively from a safe distance. That may be the norm in the months to come, he noted. “We were very surprised at...

Last week, Yardi Matrix hosted three webinars that provided insight on how the COVID-19 pandemic is impacting the self storage, multifamily and commercial real estate markets. Let’s look at the insight on the commercial market, which is extensive. This post continues our first commercial sector recap, which you can read here. Feast and famine in industrial The industrial sector witnesses mixed results from shelter in place mandates. E-commerce is roaring as consumers and businesses go online to purchase necessities without leaving home. Logistics and distribution are regarded as essential services, largely immune to shut down mandates. These niches are among the few still adding jobs. Walmart has posted 150,000 new positions, followed by Amazon with 100,000 and CVS with 50,000. They’re offering enhanced benefits as well as boosted hourly wages. Not all industrial tenants are forecasted to whether the downturn. Small business that occupy multi-tenant industrial spaces could dissolve. Most tenants aren’t positioned for unlimited viability. Multi-tenant, smaller organizations compose nearly 45% of industrial space which will have a notable effect on overall industrial performance. Retail on thin ice with few exceptions Grocers are thriving, but the boon is not expected to last long after the COVID-19 recovery. Before the pandemic, cash flowed away from grocers to restaurants and meal kit delivery services. Social distancing has hamstrung both of those competitors, forcing consumers back to store aisles. Grocers are hiring as well as grocery deliver companies. Such businesses are expected to add 300,000 workers over the next three months. But as the crisis subsides, grocer revenue will return to normal. No matter what, its clear that retail landlords will be hit hard. Social distancing policies have reduced and, in many cases, eliminated transactions at brick-and-mortar stores, which were already experiencing a decline with the...

Last week, Yardi Matrix hosted three webinars that provided insight on how the COVID-19 pandemic is impacting the self storage, multifamily and commercial real estate markets. Let’s look at the insight on the commercial market, which is extensive. This post will cover the office market – a follow-up on industrial and retail can be found here. National overview For most sectors of commercial real estate, the next four to eight weeks will be tough. Due to state public health mandates, up to a quarter of the country’s economy has shut down, which will result in double digit GDP drops. The travel, hospitality, and restaurant industries have been the hardest hit, affecting about 30 million people. The United States Department of Labor reported 6.6 million new jobless claims in March. While outlook for Q2 and Q3 is not encouraging for all sectors, a few sectors are functioning if not thriving. Agriculture, industrial, distribution, and construction are among the sectors that are stable or growing during the pandemic. For sectors that are suffering, analysts forecast a dip in economic performance rather than a long-term decline. How much and how broad of a dip is still up for debate. The peak and denouement of the pandemic are uncertain, and business impacts will follow. In response, Congress has passed a $2T CARES Act stimulus package to offset economic decline and aggregate demand. The Federal Reserve rolled out several initiatives for small businesses totaling $350 billion. Large business can take advantage of nearly direct access to federal resources for capital. Efforts to stave off business bankruptcies are accompanied by consumer aid efforts. Though consumer spending is being redirected, it is only moderately reduced. The big question on everyone’s mind: can businesses stay open and recall workers when this is...

The Yardi Matrix research team delivered an insightful presentation on the state of the national self storage market on March 31, with one of the primary themes being the impact that the COVID-19 pandemic may have on the industry. Though the ultimate result of this unprecedented situation will roll out in the coming months across all real estate sectors, early indicators suggest that self storage investments may be equipped to weather the storm, the Matrix team reported. Miss the presentation? No problem, you can find the recording here. Jeff Adler, vice president, Yardi Matrix, delivered the hour-long market summary for a record number of Matrix webinar attendees. “From my perspective, consumer demand for self storage is stable or growing at this point in time,” Adler shared. Residential consumers who wanted to move out of storage to save money would have already done so, he commented. The greater industry risk, Adler noted, is from small retail businesses that may use self storage facilities for inventory storage/warehouses, since brick and mortar retail is extensively affected by nationwide non-essential business shutdowns. The coming weeks and months will reveal just how vulnerable such tenants might be. A key factor to watch when assessing the health of the market is business bankruptcies, shared Adler. If states and metros can bounce back quickly and rehire workers, impact will be lessened. But prolonged shutdowns could lead to greater distress and increased impact for the self storage market. From an investment perspective, major REITs have essentially halted their purchases in the self storage market for the time being, shared Jack Kern, director of institutional research for Yardi Matrix. “Nobody is moving forward (with planned transactions),” said Kern in response to a question asked on the webinar. “This may be an opportunity for...

February was the last month of the record long economic recovery before U.S. office workers were largely asked to work from home, which will likely have long term implications for the national office market, Yardi Matrix reports in this month’s National Office Report. The rapid growth of COVID-19 has made it clear the economy has quickly shifted into contraction mode as the nation reacts to an unprecedented pandemic. “This is a rapidly changing situation with no clear timeframe or conclusion, and as of now it’s unclear how long the shelter-in-place orders, social distancing and moratoriums on public gatherings will last or how deep the economic contraction may become,” states the report. Market experts also suspect that the mandatory work from home restrictions may have long term implications for offices, perhaps changing how feasible and desirable workers view remote work, while potentially having more challenging implications for the coworking industry. Office transactions will likely come to a halt for the time being despite record low interest rates and widening cap rate spreads. For the most part, the office market didn’t enter this situation overbuilt or with loans that are overleveraged. This should help activity resume once the crisis subsides. “Owners may be hesitant to lease space to coworking firms that are themselves dependent on short-term leases. Further, remote workers that had utilized cowork­ing space may find themselves making the home office a permanent one over the next couple of months,” states the report. Yardi Matrix will offer a two upcoming webinars next week on the impact of COVID-19 on the U.S. real estate market. Join the webinar with multifamily focused insight on Wed., April 1 at 10:30am PST. Join the webinar with a commercial real estate focus on Thurs., April 2 at 12:30pm...

Multifamily property performance has been stellar throughout most of the country. There are, however, distinct regional differences in fundamental measures. Savvy investors examine macro and micro economic trends before making investment decisions. Focus areas include rent growth, occupancy trends, supply growth and transaction activity. By understanding those multifamily trends, property managers can optimize property performance and occupancy to satisfy investors. The IMN Property Manager & Operations Forum – Southwest dove into the nuances of real estate data and how it impacts investors’ decisions. On the panel, “Multifamily Investment Trends & Their Impact on Property Managers,” industry experts identified best practices that can help property managers navigate data to their benefit. Chris Nebenzahl, director of institutional research, Yardi Matrix, was one of the experts on the panel. He explored the benefits of monthly national and metro trends reports, such as the reports Yardi Matrix provides for multifamily. Robust reporting provides insights into the industry that can help property managers make informed decisions. Definitely mess with Texas Texas markets, especially the Dallas-Fort Worth metroplex, are very strong places to invest. Supported by job growth and ample land, these markets are ripe with potential. There is a lot of capital in play throughout the state, even in smaller markets. The rise of popularity has made finding deals increasingly difficult. “The value-add trade is far less lucrative and easy to find than it was earlier in the cycle,” says Nebenzahl. “Yields are compressing making the value add harder to accomplish.” He adds that since valuations are high, the next decade will be focused on operational efficiencies, “Hold periods will likely extend out, and high equity multiples will be less likely. As a result, cash flow, managing expenses and driving revenue as much as possible will be essential for...

Multifamily housing performance has been strong across the U.S. during the current economic cycle, but there are notable regional differences in market health, investor demand and economic growth, says the latest Yardi Matrix regional multifamily report. The report analyzes rent growth, occupancy, supply growth and transaction volume in 130 metros between 2016 and 2019. The strongest performances were delivered by metros in the Southeast, Southwest and Western U.S., while the Northeast and Midwest were slightly behind. Key takeaways from the report: The Southeast, Southwest and Southeast have outperformed in rent growth, employment and transaction volume The West and Southwest have led in rent growth for most of the economic cycle Led by the Northeast, occupancy rates at the end of 2019 were nearly 95 percent in every region except the Southwest The Northeast ($2,066) and West ($1,824) have the highest rents in the nation New investment is highest in the Southeast and West, which accounted for 60 percent of multifamily transaction activity last year “Robust demand to add multi-family properties to portfolios pushed deal flow to an all-time high of $119.5 billion in 2019,” notes the report. Nearly 300,000 multifamily units were delivered last year nationwide. Find all the regional performance insights and learn what’s happening in your region in the Yardi Matrix regional multifamily report.  ...

Yardi Matrix national multifamily report reveals that the southeastern markets continue to demonstrate strength. Not surprisingly, affordability and job opportunities attract renters to the region. Yet as with most of the nation, major metropolitan areas have become less affordable—and therefore less feasible—to most renters. A few surprising suburbs spark renters’ interest instead. Old news, new spin Most people who are priced-out of major markets make their way into the more affordable suburbs. On Seattle-based real estate brokerage Redfin, for example, the most year-over-year pageview increases occurred on cities just outside of major metros. Such suburbs might not offer the trendiest features, but affordability is a major motivator. Renters like to have money left over to enjoy after paying the rent! None of that news is new, exactly. The trend has been gaining traction since the end of 2012. What may be more surprising, however, is that more than half of the nation’s hottest suburbs are in the southeast rather than the go-to coastal cities. Sizzling southern markets Though national data is sending mixed messages on growth, the southeast has performed consistently well. The average U.S. rent declined by $1 in the first month of 2020, ending January at $1,463. This marks the third consecutive month of declining rents. In contrast, year-over-year growth has hovered around 3.0%. More than half of the top 30 markets posted year-over-year rent growth above the national average and, in a rare occurrence, zero major markets reported negative year-over-year rent growth. Just outside of these successful markets, suburbs are thriving, especially in the southeast. Per Redfin year-over-year pageview reports, the following 10 suburbs have experienced the highest interest: Willowsford, Ashburn, VA (Washington, D.C. metro) Bal Harbour, Fort Lauderdale, FL Wildwood, Charlotte, NC West Arvada, CO (Denver metro) Waverly Hills, Arlington,...

The U.S. multifamily market’s consistent performance over the past several years should continue into 2020, according to a new market analysis from Yardi Matrix. That outcome assumes the absence of major shocks to the macro economy or the capital markets such as trade war escalations or slowing growth in Asia and Europe. But for now, prospects remain bright, thanks to steady economic growth in most markets, a healthy job market, low interest rates and an oil glut that has suppressed inflation. “Even if employment were to cool and the economy to face a mild recession, we expect the housing market, and multifamily specifically, to ride through the downturn with relatively little impact,” the report says. Other concerns loom over the market. For example, despite the decade-long economic expansion, homebuilders haven’t kept up with demand, producing a significant housing shortage in many metros. That imbalance and steady rent growth prompted rent control measures in high-cost California, New York and Oregon in 2019. Industry watchers are wary of additional state and municipal legislation intended to promote affordability that could end up dampening development and driving investment to markets with higher growth potential. Yardi Matrix is ready to share insight into factors shaping the U.S. multifamily market including potential military conflicts in the Middle East; the growth of technology and manufacturing in places like Phoenix, Atlanta, Denver, Seattle and Austin, Texas; millennials’ and boomers’ lifestyle preferences; construction labor shortages; the Fed’s actions; and more. Download the new market analysis for winter...

Here are some highlights of the most recent U.S. office property report from Yardi Matrix: Office-using employment increased 1.6% year-over-year in November 2019. The average asking rate increased 2.3% year-over-year that month while the vacancy rate fell 10 basis points to 13.6%. Growth in demand for office space as measured by office-using employment is heavily concentrated in a handful of metros. The top 20 markets tracked by Yardi Matrix accounted for 64% of office-using employment growth from October 2018 to October 2019 but only about 42% of total employment growth. Transactions through November totaled $82.2 billion, on pace to match or exceed the $93 million recorded in 2018. Sixty-seven million square feet of space was delivered year to date through November and another 156 million square feet remains under construction. Learn more about key trends in national supply, demand and sales—along with the factors driving listing rate increases in Brooklyn, N.Y.; and why the office market economies in Nashville, Tenn., and Orlando, Fla., are riding high—in the Yardi Matrix national office report for December...

A new report from Yardi Matrix shows that elevated supply levels continue to weigh on U.S. self storage street rates, which fell 1.7% year-over-year in November 2019 for standard 10×10 non-climate-controlled units and 3% for climate-controlled units of the same size. Self storage projects under construction nationwide accounted for 9% of the total existing national inventory that month, a 20-basis-point, month-over-month increase. San Jose, Calif., and Portland, Ore., led in this category with 18.5% each, followed by Seattle, New York City and Sacramento, Calif. The month-over-month national average street rate did increase by $1 in November as new-supply pressures slowly alleviated in select markets. Strong demand for storage space reflects job growth in metros like Orlando, Fla., which added more than 54,000 jobs in 12 months and saw its self storage pipeline grow 50 basis points from October to November. Other metros with rising populations, such as Dallas, Houston, San Antonio and Austin, Texas, also have seen significant new supply over the past few years that resulted in street rate declines. The most recent Yardi Matrix monthly supply and rate recap incorporates an enhanced approach for calculating projects under construction and planned as a percent of total existing inventory. “Compared to our old method, the new methodology provides a more complete picture of the development pipeline and results in a minor increase or decrease of the development pipeline of many markets,” the report says. See that new methodology put into action in the Yardi Matrix national self storage report for December...

Here are some key findings in the most recent U.S. office property report from Yardi® Matrix. All figures are as of October 2019 unless otherwise noted. Demand for office space remains strong, with office-using sectors adding 545,000 jobs over the past 12 months. One of every three jobs added in the 12 months ending in September were in office-using sectors. The average U.S. office asking rate increased 2% year-over-year. Per-square-foot prices for central business district buildings are 24.6% higher than in 2018. Prices for buildings with A+ and A ratings have increased 12.1% this year. Markets with the highest year-over-year listing rate growth were San Francisco, Tampa, Fla., the San Francisco Bay Area and Manhattan. N.Y. The national vacancy rate increased 40 basis points from the previous month, to 13.7%. Lower interest rates have helped accelerate transaction activity since the summer, with investment volume totaling $74 billion. Office space delivered nationally totaled 59.2 million square feet. 1 million square feet of space is under construction. Get all the details in the Yardi Matrix national office report for November...

The latest Yardi® Matrix U.S. multifamily market update illustrates good overall performance in the sector, with strong demand, steady new supply and consistent rent growth among the key characteristics. Demand for multifamily housing, driven by rising divorce rates, an aging population, and young people delaying marriage and raising children, figures to remain strong for the foreseeable future. Much of the economic growth powering demand is occurring in Southern and Western regions. Meanwhile, national supply growth can be expected to remain in line with 2018 deliveries for the next few years. The webinar update, conducted by Jeff Adler, Yardi Matrix vice president and general manager, and Jack Kern, director of research and publications, also debuted Yardi Matrix’s structured examination of political risk as an investment factor. The analysis weighs a metro’s affordability, philosophy toward affordability (e.g., rent control, zoning policies, permitting and entitlement requirements), urban policing/security, social mobility, tax burdens and unfunded pension liabilities. In the analysis’ first iteration, San Francisco, Chicago and New York had the highest risk scores among 20 major metros while Salt Lake City, Raleigh-Durham, N.C., Indianapolis and Nashville, Tenn., had the lowest. The scorecard is a work in progress, and Adler invited Yardi Matrix users to offer ideas for improving it. “Overall, the sector is performing well, but affordability remains a headwind,” Adler said. Public-sector responses such as rent control and zoning changes have been adopted in Oregon, California and New York City. Such approaches, however, are likely to touch off an exodus of investment capital and create disincentives for new investment, ultimately producing housing shortages. Adler outlined market-based approaches that let supply respond to demand. They include coliving, which minimizes space needs; Airbnb, which monetizes unused time; and modular designs, which lower construction costs. Seattle, Dallas, Denver, Houston and...

Have you found it easier to move those three-bedroom units than before? For decades, larger units were tougher to rent. That narrative has changed in the recent years. New data projects the trend is likely to continue—and 3.6 million families may enter the rental market. Single-family rentals have experienced an ascent in popularity. The demand has encouraged the construction of 3.6 million units in the past decade. Yardi Matrix, an apartment intelligence provider, reports that 52 percent of the apartments built between 2006 and 2016 have at least two bedrooms. Of those, 41 percent are 2-bedroom units, 9 percent have three bedrooms and 2 percent have at least 4 bedrooms. Fewer families with young children can buy a home. As a result, families are making their mark on multifamily development by driving the demand for larger units and plenty of them. The Backstory The housing crisis was more than a decade ago, but the aftermath lingers. Greater restrictions on lending led to higher home prices and a grinding halt in new home construction. At the depth of the recession, home prices dropped–right along with job security–leaving fewer opportunities for families to confidently invest in a house. With fewer entry-level homes to meet their needs, young couples and families turned their eyes towards renting. Families with young children who own a home dropped by 3.6 million from 2006-2016 (the most recent U.S. Census). As the economy recovered, home prices surged disproportionately to salaries and rent rates. National real estate brokerage Redfin suggests that the median price of a single-family home increased by 35 percent in the past 5 years. That’s 75 percent faster than rent increases which rose by only 20 percent, reports Yardi Matrix. For context, when adjusted for inflation, workers’ wages only grew...