Expenses Rising – Karlin Conklin interviewed
GlobeSt spoke with IMG Principal Karlin Conklin about the impact of rising expenses for multifamily owner/operators.
WOODLAND HILLS, CA — June 16, 2023 — A new report from S&P Global Ratings reveals that expenses are increasing at a faster rate than revenues for multifamily affordable housing properties, and this trend is expected to continue. Despite this, property owners have seen net income per unit increase due to high rent growth of up to 37% between 2020 and 2022. However, rent growth has significantly slowed in 2023, with the median US asking rent falling by 0.6% year over year to $1,995 in May. This drop is attributed to increased supply from a building boom and economic challenges that have reduced demand.
On the expense side, property insurance premiums are becoming a larger proportion of total expenses, with average property insurance costs rising from $387 in 2020 to $590 in 2022. Additionally, repairs and maintenance costs have increased from $816 to $1,045, and utilities have spiked from $1,487 to $1,693.
Geographical location plays a significant role in expense and revenue management. Insurance increases have been cited as a primary reason for buyer re-trades and have impacted transactions in coastal markets. Insurance costs have risen substantially due to inflation-fueled construction cost increases, leading to higher replacement values for buildings. Insurance premiums for multifamily properties have doubled or even tripled in some cases.
Despite these challenges, owner/operators in the multifamily housing sector remain optimistic, with only a small percentage expecting a decrease or negative net operating income (NOI) this year. However, there is concern about the future and the potential impact of rising expenses. As IMG Principal Karlin Conklin suggests in a recent interview with GlobeSt, expense management will become crucial during a market correction, focusing on minimizing costs to increase NOI rather than pursuing new revenue streams. She emphasizes the importance of offering residents a quality living experience at reasonable rents without burdening them with excessive charges.
Read the full article at GlobeSt.com – Expenses Rising Faster Than Revenues for Many Apartment Owners By: Richard Berger
Published June 16, 2023