The Urban Pacific Group of Cos. feels confident heading into this potential economic downturn. Housing remains undersupplied in California, despite the decrease in demand, and the developer believes its urban townhouse model—a three-story, five-bedroom floorplan—is well positioned to succeed. The urban townhouse targets multi-generational households, which could grow rapidly as renters look to curb living costs.
“Even today, we are still undersupplied in California,” Scott Choppin, founder of the Urban Pacific Group of Cos., tells GlobeSt.com. “Demand is reduced today, you could argue dramatically, depending on what micro market and the niche within multifamily, but we still have an undersupply of housing. As a result of this, I think that we will see more families joining together to share incomes and expenses even more dramatically than we did before. That was already our story in the UTH model.”
The developer currently has two projects: a completed asset in Fullerton that is in the lease-up phase and a project under development in Montebello. “We only have exposure right now on two projects. The strategy continues to be viable,” says Choppin. “I think that we are in a relatively insulated, defensive position. Our housing product does serve families that want to come together in larger family groups, further combining rents and incomes.”
The construction project in Montebello will remain under construction, and could actually finish early as a result of the pandemic. “We can continue to do construction, which is still an essential activity, and we have actually seen an increase in available labor,” says Choppin. “Other jobs are shutdown because people are pausing to wait it out, and we are increasing velocity in construction right now. We won’t start leasing until late 2020 or early 2021.”
In Fullerton, the project hasn’t seen a significant decrease in leasing inquiries. “We have a project in Fullerton that we are leasing up now, and the leasing team has indicated to me that they are getting the same sustained number of calls on that project then we did before.,” says Choppin. “Obviously, we are watching it day-by-day. If calls dropped off, we would have to talk about lowering our rents. The micro-market demand for our product still seems to be there.” The property is currently 28% pre-leased.
For the long-term, Choppin expects the disruption to be temporary, and a quick recovery once the coronavirus outbreak wanes. “The economic consensus is an awful second quarter, a third quarter that is 7% to 10% down and then a flat or rising fourth quarter,” says Choppin. “We are in the worst hit to the service worker economy that we have ever seen, but the general demand for those workers isn’t disappearing. Once that part of the economy returns, it should bounce back really quickly.”