Multifamily Developers Face Shifting Market Conditions
Typical economic indicators like employment, inflation, and investment remain favorable for the apartment sector, and, even though demand for housing remains high in many markets, permitting and completions ticked down in 2018.
SAN DIEGO—From evaluating the opportunities and challenges of using big data to mitigation strategies, a power panel of experts at last week’s the 2019 NMHC Apartment Strategies Outlook Conference discussed risk influence factors and how these issues impact their thinking on 2019 development strategies.
According to Jeff Adler, VP of Matrix at Yardi Systems Inc. said that development while pipelines appear to be large in some of the top markets, but as you stretch it out over the delivery timeline, it isn’t that bad.
As for how deals are still getting penciled out, Bob Flannery, president, CA Residential, said that historically, there has been a tendency to think about the investment and less on the consumer but he has done a lot of research and trend analysis that shows that the consumer is price point conscious, so his company has been very focused on how to design a project that hits the price point they can afford and gets them the amenities they are looking for.
“As construction have gone up, we have thought about more efficiently designed units that are smaller while giving them amenities that lower their overall fixed costs,” said Flannery. “What we have seen is that we have been able to build units that can be anywhere from 15 or 30% smaller but still deliver a project that works for our consumer.”
Flannery talked a bit about thinking about diversification and the concept of innovative construction, noting that “Balancing your diversification and risk is key but it is all about the demographics and trends and the metrics and being disciplined.”
Panelist Kim Bucklew, managing director of Alliance Residential Co., said that her company is focused on staying with its core product that they are most familiar with. “We aren’t trying to get outside of our risk perspective and within that product type, we are diversifying product type a little bit,” she explained. “We are focused on perfecting the units to meet the demand of the renter that is price sensitive. We are focusing on simplifying what we are building and focusing on the product itself.” She added that another route the company has gone into is senior housing.
Cliff Nash, senior managing director of finance at Greystar, said that his company is really listening to its property operators. “We are expanding product offerings as well so we can have more ways to find success. The other piece is that we are turning over a whole lot more stones to find deals that actually work.”
For TCR, Leonard Wood Jr., senior managing director, said that the company is really trying to dissect the hard costs and really are focused on making efficient buildings. “We are trying to really scale back where we can.”
Check out the below articles for much more from the NMHC conference.
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Do Multifamily Investors Face a Less Certain Market/?