The multifamily sector is showing new signs of life, and it is refreshing talking to brokerage professionals across the country who are reporting a dramatic uptick in activity. During April, May, and June, property owners adopted a “wait-and-see” attitude, and brokerage activity slowed dramatically. Now, most brokers are extremely busy preparing materials to update values for sellers looking to assess the impact of COVID-19 on pricing. Amazingly, it appears collections have remained strong, and the difference in revenue pre-COVID-19 and the present has been minimal.
There has been pipeline growth as well as a slight uptick in closings in the Dallas-Fort Worth multifamily market. Tour activity has also increased—mostly with local and regional buyers, as travel restrictions are still in place for many. With sharpened skills in navigating the world of virtual meetings and communication, professionals are anxiously awaiting the return of in-person presentations, tours, and business meetings.
Currently, there are a limited number of deals on the market, and, of those being placed under contract, most investors are high net worth groups or funds.
Volume is expected to increase after Labor Day as we continue to see more interest in the Dallas-Fort Worth market, especially from investors previously investing in New York and California markets, where there are concerns related to new or proposed changes in tenant/landlord law. Also, investors that have been traditionally focused on office product are now seeking to deploy more capital in the multifamily sector.
Shifts in the market continue to keep investors and sellers engaged. Suburban product with a lower cost basis and within well-rated school systems is growing in popularity, challenging the intown, urban deals. Developers are finding it more difficult to obtain construction debt, and equity providers are more selective. Many sellers have opted for limited versus full-scale marketing campaigns, and there has been a surge in off-market activity – with buyers understanding, there will be no pricing discount with this type of transaction. International capital remains on the sidelines as travel restrictions continue, and low-interest rates keep cap rates intact.
Stymied during the entire second quarter of 2020, the multifamily brokerage community is now experiencing a resurgence of activity. Buyers, sellers, and brokers alike can now see the light at the end of the tunnel. With hard work (and a little luck), the multifamily sector will rebound and follow the positive momentum toward economic recovery.
Brian O’Boyle is vice chairman of Multifamily Capital Markets for Newmark Knight Frank’s Dallas office.