Following the release of their April 2020 National Multifamily Report, Yardi Matrix has held two webinars so far in May addressing COVID-19’s impact on U.S. commercial real estate.
The May 13th webinar recapped some current economic data points:
- U.S. GDP contracted 4.8% in Q1-2020
- 34M have filed for US jobless benefits since the beginning of March
- 14.4 million jobs will be lost in the coming months, and the unemployment rate will rise to a record 13% in June*
With COVID-19 infections hitting a plateau, Yardi noted the cautious optimism officials are expressing around economies slowly reopening. Ninety-five percent of the U.S. population was under statewide stay-at-home restrictions for the majority of April 2020. By May 1st, that dropped to 72% and by May 10th it fell to 50%.
An acceleration of pre-existing trends is expected to follow the pandemic:
- Deglobalization (trade & immigration)
- Technology/automation & remote business tools
Accelerated trends specific to the multifamily industry include a population shift to the South & West, and increased movement to urbanized suburbs.
Multifamily real estate investments holding up okay…so far
In their May 6th webinar, Yardi noted that multifamily real estate is positioned to perform better than office, industrial, and retail asset classes. Small floor plans in Class A major cities are struggling as younger people who don’t have a tie to the city are extinguishing leases and moving home. Deferrals and payment plans are increasing, but cash should be there eventually—even if it’s late.
Assessing regional performance
Collections reports from Portland, Seattle, San Diego, Sacramento, Salt Lake City and Phoenix have been generally positive. The common thread in these regions are the strong government, tech & healthcare fundamentals in place. As of early May, the coronavirus pandemic has had a deeper impact in markets such as Orlando, Las Vegas, New Orleans, Miami, NYC proper, and LA County proper. Across the nation, suburban assets are performing better than urban locations.
Leasing season is gearing up across the country. Property Management firms are embracing the “new normal” of virtual tours and online leasing. A reshaped, but relatively active leasing season is forecasted. Going into June, everyone will be closely watching to see if increased concessions in Class A assets start cascading rent reductions.
*Source: Consensus of 57 economists surveyed by The Wall Street Journal
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