BlackRock: Don’t Expect Multifamily Distress Prices in the Near Future
There are multifamilies on its CMBS watch list, but that figure was as low as for the strong industrial segment and lower than any other.
Looking for pandemic pain and suffering to turn into a distressed bonanza in multifamily? Don’t hold your breath, says BlackRock.
In a recent report that looked at multiple aspects of the US CRE markets, BlackRock noted that while all is not well with multifamily, looking for major distressed pricing could be a long wait.
The report pointed to the National Multifamily Housing Council rent payment tracker and that the figure of “apartment rent collections for market rate units during February 1st to 20th, 2021 was 89.4%, 2.5 percentage points lower than a year ago, which has combined with higher concessions in many markets.”
Even since the report, things have improved. As of April 6, 79.8% of apartment households made either a full or partial payment by April 6 in the survey of 11.6 million professionally managed units. That’s a 1.9 percentage point increase over the same period in 2020 and a sign of a recovering economy.
The improvement could be the result of additional federal housing assistance, though BlackRock thought that additional aid would be needed. There are multifamilies on its CMBS watch list, but that figure was as low as for the strong industrial segment and lower than any other.
“We’re already moving back into raising our market rent [territory] again,” Steven Cornet, BlackRock’s head of US research and strategy, real estate, tells GlobeSt.com. “We’re getting back not in all metrics but in several, like occupancy and concessions, it’s back to pre-pandemic.”
Even the biggest markets are coming back, although “not in the same way” as before, Cornet says. Take New York City for example.
“The traffic of people looking at units in New York is notable,” Cornet says. “Companies are starting to trickle back into the office. If people start going back to the office, they will go back and rent apartments.” It’s still “not uncommon to have a two-month concession on a year or 14 months. San Francisco, you can put into the same category.”
Plus there is the “$26 billion in rental assistance [that we] think that will prevent a large amount of distressed inventory” from hitting markets.
“Collection levels continue to be higher for Class A apartments at 91.5%, and lower for Class C apartments at 85.1%,” the report said. “Overall, we are still constructive on the apartment sector as we see good income growth, jump in household formation, and a rebounding economy as supportive for the apartment sector.”