How Coronavirus is Impacting Multifamily Investments and the Transaction Process
More sellers moving toward Off-Market transactions; Investors hungry for data — Offerd’s Leadership Team says
Deep into the first quarter of 2020, the multifamily housing market continued to be the strongest it has ever been, with demand for rental housing continuing to rise. That has not changed despite the economic impact of stay-at-home policies, according to Travis Farese, Founder and CEO of Offerd, a Multifamily Acquisitions and Analytics firm. Stay-at-home means stay in your rental apartment for the largest percentage of Americans in 50 years. It is this fact that drives investor demand for this asset class.
Now, approximately six weeks into the current environment, there is a noticeable decrease in widely – marketed, For Sale, multifamily listings.
“Despite a significant drop in listings, we are seeing only a slight decrease in investor demand. Yes, underwriting is being modified. Specifically, for example, there’s a downward adjustment in near-term rental growth assumptions – but because the fundamentals of the overall asset class remain, our clients are moving forward with Acquisition Campaigns,” states Farese. “Going into shelter-in-place, investor demand was extraordinary, with dry powder at record levels. While there’s a slowdown in immediate near-term transaction activity – as investors and sellers work to come to agreement on ‘finding the floor’ in collections and NOI – this pause will only serve to create pent-up demand.”
Concerns about Misperception Increases Off-Market Velocity
During times of economic uncertainty, owners who had plans to sell are understandably concerned that if they do so in a widely exposed manner, “the market” may perceive them as being in “distress”. Ken Hoff, Founder of Multi-Housing Equity Partners and now President, Acquisitions and Partner at Offerd has seen this before. “We saw this during the Great Recession. The fact is, heading into this current situation, transaction volume was high every month. The second and third quarters of this year were expected to see incredible volume. Why? Because owners targeting their assets for exit now made those disposition decisions a year ago, or more, long before shelter-in-place. But if you’re selling during a crisis, there is a common misperception that you must be in distress. The simple solution more owners are turning to: selling Off-Market.”