The Recession Will Hurt, But Boston's Multifamily Market Is Poised For A Quick Recovery
The initial shock of the coronavirus pandemic might be past, but that doesn't mean landlords, tenants, developers or prospective renters and buyers aren't still trying to cope.
A cornerstone of operating multifamily buildings as safely as possible has been "communicate, communicate, communicate," Samuels & Associates principal and Chief Operating Officer Leslie Cohen said on Bisnow's recent webinar, Managing & Protecting Properties: Multifamily During Coronavirus.
"We've pivoted to figure out how to continue to build community after the initial shock," Cohen said. "Now we're settled into a new normal. The first few weeks were a little fast and furious."
Whereas the last recession was driven by a banking and wider financial failure, The Collaborative Cos. Managing Director Sue Hawkes said, the coronavirus has hit every aspect of the economy.
"However, I think that's the good news," she said. "Without being overly optimistic about Boston, the region has great economic engines. It doesn't rely on one source of income."
One of the reasons Boston multifamily was able to recover relatively quickly from the last recession was lack of inventory, Hawkes said, and that is still the case — both for rental and for-sale product. In recent years, the market has been able to absorb 20,000 or 30,000 units a year, with only a few months' inventory.
The current downturn will impact different Boston multifamily developers differently. Those more highly leveraged, or perhaps with a project that is only 10% or 20% sold, will see softening.
"There's no question that we're looking at a potential pro forma escalation of anywhere from six to eight months of absorption, maybe more," Hawkes said. "The strategy that developers need to look to is their own ability to stay. If they can hang on for the long haul, there's no reason they can't get out of this in a reasonably comfortable time frame."
Boston Realty Advisors Managing Principal Wil Catlin, who co-moderated the event with Bisnow's Chris Bushnell, asked if millennials, currently dealing with their second economic crisis before they turn 40, are looking to buy residential units in the current climate.
"Millennials by nature are pretty resilient and are comfortable taking risks," Hawkes said. "As long as they still have a job, they're pretty comfortable with [buying]. Interest rates have never been more attractive."
Leasing is also still going on at her for-rent projects, Hawkes said, at least five units a week in some places.
"I'm amazed at the activity in the suburbs," she added. "We have a project in the Plymouth area that has sold 18 units in the last six weeks. That's predominantly an empty-nester community, so I think that begs another question: Are we going to see any pushback from people not wanting to live in a dense environment?"
Samuels & Associates communicates through its Yardi platform, RENTCafé, Cohen said, striving to be consistent in reminding residents of what's going on — such as how package retrieval might be different or status updates on amenity spaces.
Samuels & Associates also uses email, phone and text communications, a method of communication it typically hadn't done before, she said. The crisis is causing the company to rethink other, older ways of doing business, Cohen said.
"Maybe there's a way to do leasing differently going forward," she said. "We have an aggregation of over 1,500 units, so maybe there's a way to lease differently, rather than having individual agents sitting in individual buildings."
Cohen said her company isn't seeing the rent growth it projected before the pandemic, but also believes the slowdown is temporary.
"We're focused more on retention, incentivizing people to stay," she said, adding that the company has been able to retain a number of residents who gave their notice in the early days of the pandemic.
"We simply went back to them. [It's] typically not something we do, but we went back to check in," Cohen said. "We're trying to solidify renewals earlier than normal. We've often done early bird renewal specials, so that if you renew in 48 hours, it's at a discounted rate."