Investors across the world have sat in shocked awe as they watched the devastating economic effects the global shutdowns have caused nearly every sector of the economy. The obviously unexpected turn in global markets in the first half of 2020 has left many worried about the future of the economy. This has not simply affected one sector but rather than the economy.
The construction industry has been hit especially hard with new construction crawling to a near halt in March. Now that states are looking to begin reopening, many have lingering questions. Yet for those in the commercial real estate industry, there is good news. Despite the economic calamity ravaging the country Multifamily rent trends remain stable. So refreshing to finally hear some good news amid all the bleak headlines lately.
The largest multifamily real estate organization in the country, the National Multifamily Housing Counsel or NMHC, has developed a tracker to allow investors to see how rents are being paid in professionally managed properties around the nation. Their latest statistics indicate that although single-family homes have delinquency rates of up to 30 percent this month, things are much better in multifamily properties, with over 90 percent of companies paying on time this month.
Multifamily Commercial Real Estate Is Still Viable
In light of the recent statistics, investors have been showing a renewed exuberance for multifamily developments. Although rent collection was only at 91.5 percent in April when compared to the same month last year, the message that this data has sent to investors is loud and clear. If there is a sector of the construction industry that will remain viable through the entire extent of this crisis, it is going to be found in multifamily developments.
The news from the month of May appears to be even more optimistic. Rent collection rates for this month so far are near 100 percent compared to last year, falling in at exactly 98.1 percent of last year’s collection rate. If you have been holding off on resuming business due to all of the uncertainty, it is entirely understandable. However, at some point, investors will have to rejoin the economy. It makes sense to analyze the markets to look for any significant structural changes. Investments that were sure things in the past may no longer be good investments moving forward. Yet it does appear as if multifamily developments will make it through the crisis period relatively unscathed.
Detailed Analysis of Commercial Real Estate Trends
When we take a deeper look at the numbers, we start to see some trends emerging. Rent collections have been remarkably resilient, with rates remaining in the 90 percent or more range for months’ data that has been collected so far year over year. Although it is minor compared to the financial woes of many around the country, there is one slight area of concern for developers. There has been a slight decline in the amount that is being charged for rent. Overall, this paints a rather rosy picture for developers looking into multifamily units overall compared to the economy as a whole.
Part of the reason we see such stability amidst this sector of the economy has been the strong government response to the financial situation. The CARES act stimulus and the unemployment insurance appear to be working their magic. Finally, it is good to see some good news in a crisis like this. As the world gears up to go back to business as usual, investors are starting to see new opportunities that have been created by the rapid and significant disruption the world has just experienced. The opportunity in multifamily properties is clear and will resist economic declines better than other areas within commercial real estate.
