8 Things We Learned at Our National Multifamily Conference
There were 50 speakers and moderators and a record crowd north of 500 people at Bisnow’s annual multifamily conference in DC. We learned about new markets, design trends and what to expect in 2016. Here’s what you need to know:
1. The Long-Term Outlook Is Terrific
As apartment construction booms around the country, financiers and landlords are stomaching flattening rents and growing concession packages. But long-term investing in multifamily properties has never looked smarter. “If you’re an institutional investor like Blackstone, multifamily has become very attractive because of the stability it has,” TruAmerica CEO Bob Hart (left) said. “Some of this institutional money couldn’t spell multifamily five years ago.”
The RADCO Cos CEO Norman Radow, on the executive outlook panel with Bob, says even though multifamily construction starts are setting records, old paradigms of apartment supply should be tossed aside. “You can’t look at multifamily starts in a vacuum,” Norm said. “You compare with single-family starts, which are way down.”
2. 2016 Is Looking Good. 2017...Not So Much
Our panel after lunch discussed the pitfalls of investing in multifamily today. Flat rents plus rising costs means the scales could tip, but our experts don’t think that will happen next year. “I’m pretty bullish about 2016,” Capital One’s Sadhvi Subramanian (right) said. “2017 might be a little more down. I think we’ll see some contraction in the market.” The Federal Reserve is likely to raise rates sooner rather than later, but most financiers are already taking a raise into account.
It’s not the impending raise that’s concerning, but the trends already happening. “How many developments can keep getting delivered in the major markets where a large chunk of the renters are spending over 50% of their income on rent?” Walker & Dunlop’s Brian Casey (center) asked. “How long can that continue?
CAPREIT president Andrew Kadish (left) was even gloomier. “I think it’s a crisis,” he said. “Furthermore, when you have building materials and land prices skyrocketing, I think eventually you’re going to see a mass migration of blue-collar workers.”
3. Freddie Mac Will Hit $50B in Loans Next Year
Freddie Mac is the biggest multifamily lender in the country. Before this year, its record for loans bought was $28B. Head of multifamily David Brickman said he expects 2015 to wind up around $45B and 2016 to be even bigger. “We think the market is going to be about 10% bigger next year.” David’s been developing new products to fit a wider range of requests. It’s challenging to innovate, David said, but important.
4. The Arms Race for Amenities Continues
There was a time when a rooftop pool or dog wash area were rarities apartment renters would drool for. Now, if someone’s moving into a new apartment, they’re expected. So developers and designers must go bigger and bigger. “It’s a beauty contest to see who can outdo who,” RD Jones principal Rebecca Jones (left), next to Waterton COO Mark Zettl and WDG principal Sean Stadler, said. She said new designs on the roof turn what were once pools into pavilions and cabanas, including indoor/outdoor fireplaces. Other members of the design panel alluded to concierge fridges for perishable deliveries and a "CrossFit box" in a fitness center.
5. ‘Experience’ Will Trump ‘Things’
“People, whether they are 25 or 95, are looking for an authentic connection,” Rebecca Snyder, an Insight Property Group partner, said. “People are lonely in this region.” Rather than build the coolest pet spa, the design trends and innovations panel focused on creating and curating experiences for residents of their buildings.
“It doesn’t have to be 17 dog-washing stations and a golf simulator,” Bozzuto Group CEO Toby Bozzuto (right, having a moment with moderator Johnny Moseley) said. “It just needs to be real.” Toby’s Anthem House in Baltimore will have a coffee shop on the ground floor with street and lobby entrances. Rebecca Jones’ buildings have food and beverage uses on the ground floor, “emphasis on the beverage,” she said.
6. Technology Is the Next Amenity
In the middle of the afternoon, we saw presentations from Justin Alanis of Rentlytics, Lee Bienstock of Google Fiber (above) and Marc Silverman (below) of Kastle Systems, promoting the latest technological trends. Google Fiber is starting to come to cities around the country, promising speeds much faster than your typical cable provider. “Our country's current infrastructure is archaic,” Lee said. In Kansas City, one of the first cities with Google Fiber, “they’ve created an incredible amount of tech jobs” as a result of the speed uptick.
Marc gave the crowd a demonstration of Kastle’s smartphone app, a play into the buzzy “Internet of Things.” The app lets residents open apartment doors, sign in packages and alert security of an intruder. Because Millennials aren't on their smartphones enough, apparently.
7. Keep it Social, Stupid
As the supply-demand equilibrium shifts more and more in renters’ favor, marketing buildings for the social media generation will be paramount. Our marketing and property management panel said you simply can’t ignore the Internet: you’re there whether you want to be or not. “An absence of a social presence for an apartment building is a negative for a lot of renters,” Greystar’s Kevin Sheehan (left) said. But don’t overdo it, or you can turn some people off.
Online reviews are also important, and we had Yelp head of business outreach Darnell Holloway (right) prove it. He says a negative review can hurt, but not as much as not responding. “If you’re not responding to reviews, you’re missing a big opportunity,” he said.
8. Secondary, Tertiary Cities Are On The Rise
We heard a lot of talk about trends, the national market and the DC market at BMAC. But our ears perked up when CEOs on our executive outlook panel started talking about cities they’re very interested in. Jefferson Apartment Group CEO Jim Butz (with the mic) says Orlando looks great right now. “Orlando is growing with 2 million people and 50,000 job growth last year,” he said. “Compare that to DC with 5 million people and 50,000 job growth.”
Norm says he focuses on right-to-work, business-friendly states because “that’s where the jobs are going.” MRP Realty CEO Bob Murphy (next to Jim) is bullish on Philadelphia. Bob Hart like Las Vegas, Denver, Seattle and Southern California. In other words: if you’re just focusing on gateway cities, you’re doing it wrong.