From the pandemic-induced flight to smaller cities and suburbs to supply chain disruptions and labor shortages, the past two years have introduced significant volatility and uncertainty in the multifamily real estate market. However, as the severity of coronavirus-related economic impacts decline, some trends will revert to pre-pandemic business as usual, while others may persist, said Janette O’Brien, senior vice president and head of multifamily and Great Lakes commercial production at KeyBank.

O’Brien spoke with Bisnow about how the pandemic has affected multifamily markets and what trends commercial real estate professionals should keep an eye on moving forward.

Bisnow: Are tenants returning to multifamily properties in large metro areas, or is the flight to the suburbs we witnessed during the pandemic going to be a long-term shift?

O’Brien: In major cities like San Francisco, New York and Seattle, the pandemic prompted some residents to relocate to secondary and tertiary markets like Boise, Idaho, Spokane, Washington, and Austin, Texas, in search of more space. As the pandemic subsides and restrictions are lifted, some workers are returning to the office — and their urban apartments — and rents in the country’s large cities are starting to rebound.

However, some of the pandemic-driven migration out of large metro areas may become permanent, especially if the tight labor market and ongoing shift to remote or hybrid work models continue for various industries. This flight from the city to the suburbs happens more often when businesses and residents face local tax policies or regulations that are different in an urban area versus a suburban one.

Bisnow: How are supply chain issues and labor shortages caused by the pandemic currently impacting the multifamily market?

O’Brien: Recently, supply chain issues have eased and employment numbers are on the upswing — both of which are positive developments for the multifamily market. Late last year, multifamily construction starts soared to levels not seen since the 1970s. This was likely spurred in part by projects that had been delayed during the pandemic finally getting underway.

However, materials and labor availability haven’t completely normalized, so developers and investors still need to price those risks into their projects. Fortunately, rising rent prices will help offset lingering volatility and increased costs.

Bisnow: How are multifamily property owners incorporating technology into their operations in response to the pandemic?

O’Brien: The pandemic accelerated technology adoption across the commercial real estate industry. In the multifamily space, building owners invested in platforms that allowed them to virtually show units to prospective tenants. They also shifted the processing of lease applications online and automated some other back-of-house functions.

While some renters will always want to see a unit in person before signing a lease, tech-driven transformation in the multifamily market will continue.

Bisnow: When it comes to Fannie Mae and Freddie Mac, what do multifamily owners and developers need to keep in mind going forward? 

O’Brien: Fannie Mae and Freddie Mac remain a primary source of capital for multifamily investment and development. However, not every project qualifies for government-sponsored enterprise funding.

Unlike in other market cycles, there are many other options for financing a multifamily investment or new construction in today’s market, so it’s important to understand all your options from a trusted source for financial advice. In some cases, a government-sponsored enterprise loan may be available, but may also not be the best for that particular project, so it’s important to fully understand the loan terms and their short- and long-term implications for your business.

After more than two years of pandemic-related disruption, volatility and uncertainty remain in the multifamily market. However, capital is plentiful, and housing supply still lags demand nationwide.

This article was produced in collaboration between Studio B and KeyBank. Bisnow news staff was not involved in the production of this content.

Studio B is Bisnow’s in-house content and design studio. To learn more about how Studio B can help your team, reach out to studio@bisnow.com.