Commercial real estate veterans who specialize in the multifamily sector provided their view of the current multifamily market and what we can expect in the future at last week’s ConnectCRE Dallas Multifamily event at The Joule in Dallas.
The continuing increase in population and the quality of jobs are working very much in favor of investors and dealmakers. Banking firms like Goldman Sachs, Wells Fargo and ScotiaBank will soon be populating the states’ biggest cities and adding to the already spectacular growth. They will need a place to live. Even though developers are building, investors are still nervous.
Some lingering issues are providing headwinds. Kimberly Byrum, a Principal Advisor at Zonda, bemoaned the fact that concessions for free rent are still in the 6-8 week range, and due to the intense competition, multifamily developers have to spend more on marketing and promotion.
Kai Pan, a JLL valuation analyst, says that rents in Texas are some of the lowest in the country in relation to median income. Most Texans only pay between 15% and 20% of their income for rent. Rent growth has been a slow and challenging aspect of planning when it comes to multifamily investing.
George Smith Partners Matt Hiller discussed how increasing demand for amenities such as pickleball courts, workspaces and golf simulators, along with standard amenities such as pools, dog parks, and EV charging stations, raises the bar and costs for developers. Increased costs without significant prospects of rent gains mean investors/developers need to be clever regarding financing. The capital stack has to include a lot more creative financing schemes than it did before Covid. Equity and mezz financing have to be included now in most deals, or lenders won’t lend.
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