The wait is over! View the November 2023 Rentsync National Rental Demand Report.
It's been 6 months since we entered a worldwide pandemic brought on by COVID-19. Institutions and businesses around the world have been put to the test, and while some have prospered, others are being forced to rethink their entire business strategies. However, one thing is for certain - technology has reigned supreme during this period and those willing to adjust and adapt to a digital-first world are most likely to overcome COVID's toughest blows.
The multifamily industry is no different and although traditionally many owners and operators have been slow to adopt new technologies, they now understand the importance of implementing more virtual solutions.
Beyond this shift towards technology, questions still loom: What is the current state of multifamily? Which properties have shown the most resilience? What investments have been impacted the most during this time?
In this rental market update we'll attempt to answer these questions and more about the state of multifamily and the current trends we're seeing shape the market.
According to JLL research's midyear review the Canadian housing sector has found, "In all major markets average multifamily cap rates are around 100 basis points lower than office or industrial," JLL analysts observe. "With rent collection generally in the range of 92 to 99 per cent depending on the owner, multifamily is proving its resilience in a downturn. Consequently, vendors are offering no 'COVID discount' on pricing."
Purpose-built rentals see more competition: The high end rental market is seeing a lift in competition as investor-owners switch from offering condominium units for short-term rental to the long-term housing stock.
Industrial and multifamily REITs still in demand: Although multifamily REITs are experiencing around 15% decrease in demand, this pales in comparison to office and retail REITs who are seeing a 30% decline.
Rent collections stable for multifamily: Rent collections continue to show stability for multifamily REITs, as they report upwards of 90% rent collection versus less than 70% for retail REITs.
Vacancy rates still low in urban areas: Rent rates have lowered slightly due to the pandemic – Colliers pegs average rent at $2,412 per month or $3.28 per square foot — nudging down 0.03 per cent since Q2 2019 — vacancy rates for rentals in larger metros still remain relatively low at around 1.8%. This may be a result of delayed construction for new builds, which may insulate current landlords for the time being.
Overall, reports show that COVID created a 10-month sales year due to a lack of April and May activity, said Altus Group Data Solutions vice-president of product management Matthew Boukall. "How we're seeing the market rebound indicates pent-up demand, that was in the market prior to COVID, is coming back where supply exists."
In a recent article by Yield Pro, Ben Kasdan, a principal at KTGY Architecture & Planning, who has worked on multiple student housing projects commented on the current state of student housing:
"The numbers seem to show that everything is weirdly normal. The lease-up rates for this fall are consistent with where they have been...At first the initial expectation was that student housing was done for the foreseeable future, and that hasn't been the case."
Kasdan said many student housing options were already moving away from dorm-style bathrooms and several students in a room, something that the pandemic may accelerate.
More space = more revenue in student housing: Long gone are the days of cramped dorm rooms; housing that affords more space and individual rooms are becoming more attractive to students, and they're willing to pay more for the convenience and luxury of having rooms to themselves.
Lease-up rates stable for the fall: Despite concerns over vacant student rentals, overall occupancy rates are relatively normal this school year.
Owners of off campus housing may benefit: Due to less on-campus availability, multifamily and single family rentals may benefit from this shift. Additionally, hotels have an opportunity to open their doors to students and enter the long-term rental market.
Senior housing shows cracks in its foundation: Owner/operators and their investors are facing scrutiny and various inquiries into senior housing investments. Important structural changes in this sector are on the horizon and will likely affect this sector in the foreseeable future.
Unemployment impacts home ownership increasing rental demand: COVID-19 has resulted in a significant increase in unemployment, particularly among younger people and those in lower income brackets. That could impact ownership demand, pushing more people to the rental market.
New build starts will create a wave of inventory in 2021: While housing starts are expected to be negatively impacted this year, it's anticipated they'll rebound in 2021, which means multifamily owners and operators will need to prepare for increased inventory and vacancy to increase in the new year.
For more on the current state of multifamily rentals in the US, hear our chat with Zumper Co-Founder and CEO, Anthemos Georgiades, "Why the Rental Industry Needs Tech More than Ever," where he recaps some of the major trends happening in the American rental market right now.
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