Multifamily Specialists Remain Optimistic, Predict a Return to Normalcy in 2021

Earlier this month, New York City-based Axonic Properties LLC sold Visions at Willow Pond to Miami-based Bar Invest Group for $56.2 million. Totaling 300 units, the multifamily community is located in West Palm Beach, Florida.

NEW YORK CITY — While the COVID-19 pandemic has certainly had a major influence on the commercial real estate industry, brokers and mortgage bankers say the initial concerns about a collapse in the multifamily sector were overestimated.

That’s according to Berkadia’s 2020 Mid-Year Powerhouse Poll, which collected insights from nearly 150 investment sales brokers and mortgage bankers across 60 offices of the New York City-based brokerage, banking and loan-servicing firm.

Despite the early concerns at the outset of the pandemic, 55 percent of respondents said that current market activity is better than expected compared to how they initially thought COVID-19 would impact the industry overall. Thirty-four percent say the current market is in line with their expectations.

“COVID-19 continues to have a profound impact on our economy,” says Ernie Katai, executive vice president and head of production at Berkadia. “While no industry is immune, we have been buoyed by the resiliency of commercial real estate, including steady rent collections and continued deal activity.”

While investment sales transaction volume is lower than pre-pandemic projections for the year, 69 percent of respondents are confident that capital conditions will return to normal in 2021.

Residents, meanwhile, are largely still paying their rent. The National Multifamily Housing Council’s Rent Payment Tracker found 86.9 percent of apartment households made a full or partial rent payment by Aug. 13 in its weekly survey of 11.4 million professionally managed units.

Focus on affordable housing

The economic impacts of the pandemic have caused investors to give greater consideration to property types that are expected to weather the storm better than others. When asked to rank housing types based on their ability to maintain success through a prolonged economic slowdown, respondents noted Class B (85 percent), true affordable (81 percent) and Class A housing (69 percent).

The recession caused by the pandemic sheds more light on the ongoing need for affordable housing throughout the country. As a result, investor interest in multifamily properties specifically targeting low-income residents continues to rise. Eighty-one percent of Berkadia professionals agree that investors will be more interested in affordable housing properties than before.

“Housing instability has been exacerbated by the economic downturn and increased unemployment, but a renewed focus on affordable housing could be a silver lining of this challenging time,” says Katai. “This pandemic has demonstrated how vital safe, reliable housing is for the stability and well-being of our communities.”

When asked to identify three potential solutions for the affordable housing crisis, respondents focused on modifying tax credit policy (76 percent); local and state government intervention (61 percent); and regulatory changes for Fannie Mae, Freddie Mac and HUD (43 percent).

The 2020 Mid-Year Powerhouse Poll data was collected in an online survey conducted internally by Berkadia through SurveyMonkey in July 2020. The sample was based among Berkadia’s 60 offices throughout the U.S., consisting of 46 investment sales brokers and 97 mortgage bankers, totaling 143 overall respondents.

— Jeff Shaw

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