Multifamily Glass Half Empty, Half Full

MIAMI—There was no lack of multifamily gurus at RealShare Apartments East on Tuesday. Conference attendees filled a banquet hall at Eden Roc Miami in Miami Beach to hear what multifamily industry experts had to say about everything from the capital stack to the condo boom and beyond.

In one panel, “Industry Leaders: View From the Top,” multifamily insiders offered their perspectives from 30,000 feet on what's going on in apartments from Miami to Boston. Panelists included Michael Anderson, chairman of RealSource; Matthew Rocco, executive vice president of Grandbridge Real Estate Capital; and Greg Willet; vice president of MPF Research. Doug Bibby, president of the Multi-Housing Council, moderated the panel.

“My view is capital is probably a little too robust right now,” Anderson said. “There seems to be an abundance of cash flow into the market. RealSource, along with three or four other firms about our size, are probably looking more toward liquidating assets right now than acquiring.”

Rocco has a slightly different view. As he sees it, capital now represents the catalyst to support the recovery in the multifamily space. “I can't emphasize enough that it isn't just the capital, it's being at the right place at the right time,” he said. “We all appreciate the value of timing in the investment decisions we make… but we've also seen what I'd like to think of as a transformative shift in what multifamily housing provides today.”

That shift has moved multifamily from being an asset class that serves as transitional housing to permanent housing for a significant and increasingly growing share of the population. Unlike previous cycles, Rocco thinks the durability of multifamily is supported not just by the capital flow but also by the demographics for the next 15 to 25 years.

From Willet's perspective, we are at the point in the cycle where your glass could be half full of half empty—and you're still right. In other words, he sees the good and bad in the multifamily industry.

There is room for pessimism. Bibby noted that for four years running multifamily was the Association of Foreign Investors in Real Estate's preferred asset class.

“For the first time this year multifamily dropped to fourth place among the asset classes they look at,” Bibby said. “You are hearing more of the pundits saying it's getting late in the cycle for multifamily.”

So, where are we really in the multifamily cycle? There seems to be room to grow. Willet said it's a “really long sustainable cycle.” Again, he's looking at the demographics, with most Millennials still in their teens. He did admit that “with the new supply coming in this year it is a little bit challenging” but he's still bullish on the long-term outlook.

So is Rocco. He points to new household formation as a catalyst for multifamily growth, as well as what's coming down the pike with the senior population that is likely to shift from homeownership to multifamily rentals for lifestyle reasons.

“Overall, in the cycle, we do need to be relevant in the aspects of product, capital and investor appetite and then also have a healthy dose of fear and greed,” Rocco said. “It's when we cross those lines or aren't completely aware of when that's going to occur that we'll wind up in some difficult cycles.”