Nathan Sciarra – A Perfect Positive Storm for the Multifamily Market
Colorado Real Estate Journal
November 1, 2021
It has been an interesting last few years for our national multifamily real estate development market. A rare confluence of positive market influences and the lasting effects of COVID-19’s impact on design strategy have come together to support a market that’s now stronger than ever. From Seattle to Boston, Los Angeles to Miami, the health of the overall multifamily marketplace is far-reaching, and the greater Front Range and Denver market are both helping to drive the trend and going along for the ride.
New, institutional-quality multifamily communities as well as individual developments increasingly are being perceived as great investments due to the steady tenant demand, less capital required for upkeep and continued low-interest rates, all coupled with the changing ways of the global renter population, have greatly fueled our wonderful market fire. Additionally, shifts in the tenant mindset versus owning a home are driving down vacancy rates and fueling the marketplace nationwide. Here are a few stats to consider: According to the National Association of Home Builders, due to COVID-19, 8.7 million millennials have returned home and eventually will be back renting, most likely soon. As of Sept. 1, only 5.2 million of them had returned to the rental market. Furthermore, 32% of renters in the U.S. today don’t think attaining the American dream includes homeownership anymore, 26% of all homeowners wish they were renting, and 20% of renters say they’ll never buy a home. Clearly, the numbers are all pointed toward continued positive and healthy growth rates in the multifamily market sector.
While the financial aspects of the global economy have fueled the steady growth of the multifamily industry, the global pandemic that took hold of the world in March 2020 forced the design world to recalibrate its strategies to accommodate the new world condition. The byproduct produced innovations that have greatly improved what the consumer is now receiving. The most apparent result is a shift to a globally accepted work-from-home model. This, in turn, means that you don’t have to live near where you work, which has fueled global mobility and, therefore, tenant demand. With the vast majority of the global workforce not being able to physically go to work, many fled to far-flung destinations, looking for a change of place near family or simply to live somewhere they weren’t able to live pre-COVID-19.
We have all heard the stories of the architect who, pre-pandemic, worked in a Denver design studio but now holds down her job from her new hideaway in Sun Valley; or the Atlanta-based attorney who now works from his new great apartment in Chicago, allowing him to be closer to his aging parents; or the Seattle physician now able to work from New Mexico utilizing advanced telemedicine technology; you get the picture. Being able to work from anywhere has given rise to being able to live anywhere and has, in turn, fueled the demand for innovative multifamily properties.
To accommodate this new population of people who are free to roam the country or world, for that matter, the need for creative and flexible work-from-home space has increased dramatically and is evident in the new designs of multifamily. Increased use of natural light, close access to amenities, and living space and shared collaboration spaces are becoming more commonplace in the design of multifamily properties. Additionally, fewer virus-attracting surfaces, better HVAC-filtering systems and more touchless controls, to name a few, are ways to help minimize the transmission of illnesses, not only for the COVID-19 virus but also for flu and cold germs as well. And, let’s not forget the money saved by leasing teams now able to take prospective tenants on tours via Zoom, utilizing digital fly-throughs of the properties or, better yet, the ability for the prospective tenant to be able to physically experience the multifamily property using virtual reality headsets and supporting software.
We clearly live in a new world as it relates to the multifamily business and the design thereof. Although the last 18 months have been difficult, we’re happily and gratefully continuing down a healthier and prosperous path.