Employment growth and overall household income have always played a part in driving the economy. Since the Covid-19 pandemic, people have been laid off and as a result, the economy has been impacted. Here we will look at how the multi-family industry has been impacted, what they can expect and what multifamily 2020 trends to watch for.
Potential Gross Income Declines
According to Freddie Mac Multifamily Midyear Report, “the economy is unlikely to begin its return to full strength until an effective treatment or vaccine is available”. With this projection in mind, the rest of 2020 for the multi-family market could anticipate a higher vacancy rate and lower rent growth for a period of time. Due to the Coronavirus, a noticeable downward shift has resulted within the economy. Though the impact on multi-family properties will differ across the country as well as affecting the more established property differently than one less established, those impacted may experience a greater gross income growth decline.
The Freddie Mac Multifamily report shows a drop in demand during the second quarter with vacancy rates rising and rent growth slowing, leading to an expected decline in gross income growth of 3.3-4.2% for the year. However, this report also notes that the forecasts do not take into account projected government aid, which could make all the difference in multifamily renters pulling through the rest of 2020 versus having to look elsewhere for lower costs in housing.
Supply And Demand Keeps On Truckin
Even with expected vacancy rates rising, developers still continue to invest in multifamily properties. These commercial investments are assets and even viewed as safe havens during unpredictable times. Though 2020 has taken a hit economically, the multifamily industry seems to see this as a bump in the road as previous years provided a gross income increase that has every bit of potential to stay on pace for the upcoming years. In 2018, a 3% increase was seen in rent growth alone; most likely providing the cushion the industry needed to catch what 2020 threw their way.
Outside of forecasted growth charts, the housing market continues to see rental increases in most segments. This has a direct impact on whether multifamily properties will continue to see a steady flow of tenant demand. One reliable demand in particular is largely due to the millennial generation. The rising cost of home ownership along with student debt and lifestyle preferences leaves this generation attracted to multifamily communities that provide the amenities they are looking for. Whether it be staying close to entertainment options within their urban neighborhoods or enjoying the rooftop bars and cafes provided through their multifamily community, this generation prefers multifamily living spaces over home ownership by choice. With 22% of adults between the ages of 25-34 still living at home, equating to over 8.7 million potential new renters according to the Census Bureau, demand continues to be in full effect.
Flexible And Efficient Amenities That Feel Just Like Home
When it comes to the amenities that are offered within multifamily communities it’s important to seek after that which will provide value and flexibility to the residents. With younger generations entering the market, increased levels of entrepreneurship and digital communication driving the new norm; amenities need to be adaptive and flexible with change. Flash trends are not something property managers want to implement as they can be in one day and out the next but trends that can offer versatility as well as innovative design that sets them apart from their competitors will prove valuable amongst tenants.
The key within any design make-up is to keep community as the focus. Tenants still want to have that ‘no place like home’ feel. This is why cafe’s, rooftop bars and community spaces work so well. They provide a piece of life that most tenants are already enjoying elsewhere except in this case, it’s provided right outside their doors. It also provides an efficiency to how they do life as it takes less time to go elsewhere when seeking these atmospheres. With all this said, it’s no surprise that some of the leading multifamily space amenities consist of common work spaces offering digital savvy technology, fitness studios with all the latest equipment, DIY creative spaces and even gaming rooms for the avid gamer. It’s like home away from home all in one location.
With a consistent flow of supply and demand within the multifamily industry, change is inevitable. Given multi-demographics along with ever changing technology and innovative trends, the possibilities for new ideas are endless. Keeping up to speed with current trends is a simple way to ensure your multifamily community thrives; both for your residents and your management team.