Eviction Wave & Working from Home — July Multifamily News Roundup
The Biggest July 2020 Multifamily News
We have summarized multifamily news to emerge in July 2020. Multifamily volume has fallen in the face of economic uncertainty, and an eviction wave may occur. Google has announced their employees will work from home until July 2021, and calls to convert office buildings to housing face obstacles.
Eviction Wave May Loom and Acquisitions Volume Falls
Since March, headlines have warned about a coming wave of non-payment by apartment renters. Such a wave has not occurred. The country has avoided it thanks in part to the supplemental $600 a week offered to the unemployed under the CARES Act. That additional payment ended in July without a finalized extension or replacement. With renters facing depleted savings, no promise of federal support, and the end of eviction moratoriums, a wave of evictions may begin.
This uncertainty has led to a 70% reduction in transaction volume from the second quarter of 2019 to the second quarter of this year. Multifamily owners and would-be buyers continue to determine what pricing for assets should look like in the pandemic. One of the largest multifamily brokers, JLL, has some $9 billion in apartment complexes or single buildings currently available. The company expects that number to increase in the short term. Anyone looking for faster transactions and growth should look beyond cities. JLL executive managing director Matthew Lawton predicts increasing interest in suburbs, as workers move to commuter towns with larger apartments.
Google Tells Employees to Stay Home Through July 2021
Timelines for when major corporations will ask employees to return to the office continue to grow longer. Alphabet CEO Sundar Pichai announced that employees of its subsidiaries (chief among them search engine Google) would stay home until July 2021. Alphabet and other tech companies, including Twitter and Facebook, have set a precedent about returning to the office during the pandemic, though this extension—a full calendar year—may prove untenable or unappealing to others.
For the multifamily owners in Alphabet’s two major American hubs, San Francisco and New York City, this move means more pain. Rents for apartments in Manhattan have already begun to decline as workers become less tethered to their employers. If concessions fail to attract new renters, transaction volume will continue to stall as sellers hesitate to accept lower prices.
Don’t Worry About a Glut of Office Conversions
Housing insecurity, made more pronounced by the pandemic, has inspired calls from developers and officials (including Secretary of Housing and Urban Development Ben Carson) for the conversion of now-empty legacy office space into housing. This solution, which seems like a quick fix, faces several obstacles.
Converting offices to apartments requires a large amount of capital upfront to remove office-specific fixtures and add wiring and plumbing to accommodate dozens of new bathrooms and kitchens. Additionally, many office buildings have floor plans that prevent the entry of ample natural light. Further subdivision of these floors would only reduce the amount of light allowed into interior rooms. For multifamily developers, demolition and subsequent ground-up building remain a safe bet in most instances. Owners, meanwhile, should not fear a glut of apartments as million-square-foot legacy skyscrapers become Class A apartment complexes.
Other stories from July
- Despite low interest rates, worries about a second wave of the pandemic has caused mortgage applications to fall.
- Juno Residential, a startup based in San Francisco, hopes to make housing development more efficient by mass-producing components and reusing designs.
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