Don't Freak Out Over Multifamily

There's no question a huge bump in supply may cause some short-term pain in DC multifamily. But as development and finance experts said this morning at the Bisnow Mid-Year Multifamily Summit at the Willard, the long-term forecast remains sunny.

Freddie Mac's Rich Martinez (with Greystar's Doug Root and Chase Commercial Lending's Dudley Benoit) says encouraging job growth numbers in the DC region mean the large wave of supply coming online will likely be absorbed, even if takes a little longer than developers might hope. Young people moving to DC are much more inclined to rent, Rich says, since they don't want to be tied down to an area for too long (your boss could get impeached, recalled, or fired at any moment), and they've seen the harsh effect the recession had on home ownership.

For now, though, owners have to look to increase NOI without relying on rent growth, says Donaldson Group prez Carlton Einsel. Carlton (flanked by ARA's Drew White and Centerline Capital's Bryan Cullen) says strategies like improving utility structures or passing through certain expenses to residents (but not so much that the relationship gets damaged) can bump income in the short term.

Over 850,000 new jobs are expected to flood the DC region over the next 20 years, says Cassidy Turley's Chris Doerr—here with MAC Realty Advisors' Bruce Levin—further easing oversupply fears. (Unfortunately, most of those will be a not-so-subtle attempt to stack the Supreme Court.) In fact, since job numbers that big would require 575,000 new multifamily units over that 20 years, the region may actually be underbuilt (plot twist!), Chris says, since the DC area isn't building at that high of a clip yet. Once the current build-up of supply delivers, Bruce says to expect equity to come back strong investing in DC deals. Stay tuned for more summit coverage tomorrow.

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