The multifamily industry may feel the impact of the domestic spread of COVID-19, however the majority of the industry remains well-capitalized and strong enough to weather a modest slowdown, says Yardi Matrix in its latest report.
“Owners and operators may face short-term rent-collection issues if there is a tightening in the employment market, and value-add projects will likely slow,” the report says. Landlords and property managers “may face rent-collection issues from tenants who have either fallen ill or lost their jobs, and some flexibility with (affected) tenants may be required.
“However, most real-estate investors are poised to sustain their operations, and may see an investment opportunity as the market shocks continue,” the report says.
Seattle and Western markets led the way in February
Rents increased 3.2 percent in February on a year-over-year basis, matching January’s growth rate, as demand for multifamily has yet to feel any major impact from the coronavirus outbreak.
- Phoenix (7.6 percent) led all major markets, followed by Seattle (5.5 percent) and the Inland Empire (5.0 percent).
- Seattle has maintained incredible demand for housing, as its tech economy continues to thrive. Despite adding nearly 35,000 units in the past three years, Seattle has once again emerged as one of the fastest-growing rental markets in the country.
- All primary markets, with the exception of Washington, D.C. (3.4 percent), fell below the national average for rent growth in February. While secondary markets in the West continue to grow strongly, San Francisco (1.7 percent) and Los Angeles (2.4 percent) are among the slowest-growing markets, as affordability issues and the emergence of rent control continue to curb growth.
Coronavirus likely to cause technical recession
The Yardi Matrix report says it “seems inevitable that the U.S. economy will experience a technical recession.”
The latest data available is still from February, where rents held strong, “but the coming weeks and months are likely to show employment cuts and a slowdown in trade,” the report says.
Multifamily coronavirus outlook
“We expect the impacts of coronavirus to last roughly three to six months. However, certain industries will be impacted more than others, and hard-hit sectors like leisure and hospitality and trade may take much longer to recover.
“Most economic data has yet to reflect the impacts from the coronavirus, but given the fundamental strength of the economy prior to the outbreak, most industries should be able to recover from the oncoming technical recession.
“Overall, however, the multifamily market and the real estate industry as a whole, are positioned favorably compared to other industries during this time of rising uncertainty,” Yardi Matrix said.