Push for Multifamily to Continue in 2015

GRAND RAPIDS, MI—Multifamily developments have been sprouting up throughout the Midwest in the past few years and most experts believe this will continue in 2015. But however strong the economy gets, the go-go days of 2007 will not return. “The last downturn has made everyone far more cautious when doing due diligence on projects, especially multifamily,” Joe Elias tells GlobeSt.com. The Michigan native has spent 15 years developing real estate projects in the region, and recently helped launch the Grand Rapids, MI—based Loquidity, a real estate crowdfunding platform that aims to build communities by drawing in investment that might otherwise gravitate toward the coasts.

But Elias also believes that many factors will keep multifamily developments coming online in the Midwest even if developers have a somewhat more cautious attitude. In much of the region, for example, developers, municipal officials and potential renters are looking to create or inhabit living environments that are more urban, or “maximize social interaction,” making multifamily developments far more attractive than more traditional homes.

Furthermore, the caution that inhibits some developers is mirrored by a similar caution among bankers when it comes to giving loans, and Elias expects that to continue for awhile, making people even more interested in renting rather than buying homes. He says that he attended the most recent Urban Land Institute conference, and many participants were talking about this desire for urbanization. Elias expects an increasing number of renters will look for smaller apartments, some as small as 500-square-feet, in developments that can provide green space, the ability for them to socialize with neighbors, and quick access to downtown job centers.

“Cities are looking at building infrastructure to support all this,” he adds. He points to Detroit, where the city has built a local rail system that can shuttle its new residents to the jobs now available in the burgeoning downtown. And even though suburbs can't truly provide the same level of urbanization, many will concentrate on creating small, urban-like villages. “There is a big push for that,” especially to attract not just those younger workers, but older empty-nesters who may not want to care for a single-family home.

And as someone who has launched a crowdfunding platform, Elias believes 2015 will be the year that the financing technique comes into its own. “We've gotten the word out,” he says, especially to people who need a quick turnaround, and “you will have more and more people dip their toe in the water.”

He recognizes that using crowdfunding makes some people nervous, and people who run platforms have a big burden to explain how it all works. “But we knew that going in because it's new.”