Pub. 5 2020 Issue 5

12 www.ctaahq.org According to Yardi Matrix, multifamily absorption took a big hit in the first half of the year — 60% less than the same period in 2019 and the lowest first-half number since 2011. However, demand picked back up in July, August and September. Adler says when he looks at where that absorption has occurred, he starts to see some patterns. “Secondary markets, outside of the top six or seven international gateway cities, are where the bulk of the absorption has occurred, mostly in the Southeast and Southwest and a little in the West,” he says, adding that some Midwestern cities, like Columbus, Ohio, Kansas City, Missouri and Indianapolis Indiana also are doing well for the first time in a long time. The gateway markets, specifically Manhat- tan, Los Angeles, and the Bay Area, also saw the largest increase in the percentage of properties offering concessions. However, tech hub markets have the highest overall percentage of properties that offer conces- sions. Class A and B properties also are offering significantly more concessions than Class C, and smaller units, such as studios and one-bedrooms, saw the largest increase in concessions since January. While population and employment growth had been decelerating in some of the gateway markets before COVID-19, the pandemic hit these markets hard on rent growth and occupancy. For example, Adler says Manhattan multifamily units were 96% occupied in March and down to less than 84% at the end of September. Oth- er downtown areas, such as Boston and Washington, D.C., took hits. It’s the same on new lease transactions, down 18% in Manhattan and 15% in downtown Seattle. “You will get to a point where there is stabilization that people are moving back in,” he says. “We are beginning to see that in Manhattan, but these gateway markets have taken a whack. The gateway markets will recover, but they have a long road ahead.” Adler says he expects rent and occu- pancy to rebound. “We do see a sig- nificant hit this year, but we see 2021 coming back. It will follow along with the trends we already are seeing.” On the supply side, a slight decline is expected. “Usually in a downturn, new supply craters,” says Adler. “It’s not happening. We have seen a little bit of a dip, but the developers see through this. We expect to see a little decline, but not that much going forward.” Multifamily deliveries are expected to be significantly higher in 2021 and 2022 than Yardi’s third-quarter forecast — 318,000 units completed in 2021 and 337,000 in 2022 as the result of a strong national construction pipeline. For 2020, 285,000 units are expected to be delivered. According to Yardi Matrix, the urban cores are expected to experience a decline in deliveries over the previous six years, while new developments retreat to the suburbs. “You’re likely to see continued pres- sure for the next two to three years in urban environments, even after the pandemic has unwound. That is a bit of a cautionary tale, but it also could present potential opportunities if you can set up your capital to ride through this problem over the next two to three years.” Source: Multifamily Executive Continued from page 11 The gateway markets, specifically Manhattan, Los Angeles, and the Bay Area, also saw the largest increase in the percentage of properties offering concessions. However, tech hub markets have the highest overall percentage of properties that offer concessions. Class A and B properties also are offering significantly more concessions than Class C, and smaller units, such as studios and one-bedrooms, saw the largest increase in concessions since January.