1217 Realty Group recently attended the 2nd Annual Middle-Market Multifamily Forum (East) in Orlando and our Portfolio Manager, Jesse Shemesh, moderated the panel on New Apartment Construction and Marketing Units. It was an informative two-day conference with some of the largest operators and debt originators in attendance such as Berkadia, Hunt Mortgage Group, Greystone, and RealtyShares.
Here is our recap of our takeaways from the conference:
US Economy and Growth is slowing:
GDP Growth and Consumer Confidence is more or less stable but there could be some mini-shockwaves seen in metrics considering the large swath of hurricanes which impacted the US economy, particularly in the SouthEast. One thing to look out for is where continued GDP growth will come from in 2018.
*Source: Yardi & Bureau of Labor Statistics
Employment and Demographics:
There has been solid job formation and wage growth as well which translates to a stable demand for MultiFamily housing in the long term. Tech employment is still up but the growth is starting to slow down. Overall, demographics are in the favor of multifamily growth over the longer term, especially in the 20-34 age group:
*Source: Yardi & US Census Bureau
The next 18-24 months could be rough but refrain from panic:
While growth looks solid in the long term, expect a bumpy next 18-24 months as a large supply of Class A and B product will be entering various primary and secondary markets and that will slowly absorb. There is not much pipelined after that so expect the concessions to ease later in 2018 and early 2019 as new product gets absorbed and employment growth slows. This brings me to my next point…
Occupancy (95.6%) remained unchanged in September and is relatively strong in the market overall. There is a large amount of supply hitting the market, as I mentioned, but the fact that occupancy is the same as this time last year is a good thing as we have seen an abundance of units enter since September 2016. The one negative is that while occupancy has remained the same, rent growth has turned negative in most major markets (including Philadelphia) due to the new product and concessions in rent.
While we have seen some deceleration there is still solid fundamentals for the market over the long-term. Once we make it past the next year or so we should see demand begin to increase along with rent growth. Start pipelining your multi-family projects for 2019!