Multifamily Apartments in Strong Demand During Covid Recession
This has been an incredible year. A challenging year for all. We have been waiting and watching the multifamily markets and determining next steps. One thing is clear in the midst of this recession: multifamily apartments have been an excellent place to deploy capital.
Across all of our holdings, our average occupancy rate is above 93%. We have been able to work with tenants who have had financial distress and that has gone well both for them and the community. In short we are pleased with how things are moving forward.
Phoenix, where we have two apartment projects, (Sun Crest and Ridgepoint) is seeing a level of demand that we have not seen before. With commercial lending rates at all time lows, and capital desperately seeking safe investments, the prices have been rising dramatically. This is also why we haven't added to our holdings there. It's been very difficult to get bids with the fierce competition. This will work out well for our projects in Phoenix as we expect for this to continue for the foreseeable future. Our existing projects will be able to perform better than expected once refinanced at these new lower rates.
Typically during a recession a multifamily community should see vacancy drop a little as job losses force many families to consolidate their living situations. However, in this pandemic, this has not been the case. Class A projects are having a harder time staying leased, especially as foot traffic into leasing offices is down. Class B apartments on the other hand, which we mostly have in our portfolio, perform better and also see tenants moving in from more expensive communities.
Multifamily demand should continue to be robust as interest rates stay low and the need for for affordable, safe, and efficient housing is scarce.