CREJ

Page 8 — Multifamily Properties Quarterly — February 2022 www.crej.com Market Outlook R ecord-breaking. That’s the best way to describe what happened in the multifamily market last year. In Colorado, we’re known for our extreme sports, colorful land- scapes and opportunities for adven- ture in unexpected peaks and val- leys. Nothing, however, could have prepared those of us in the multi- family industry for the ride we’ve been on over the last year and a half. n Macro level. Surprisingly strong economic conditions and changing migration patterns prompted by the pandemic propelled the multifam- ily market to new heights, with an unforeseen surge in pricing, rents and occupancy, while vacancy plum- meted. Between March 2020 and Decem- ber 2021, Yardi Matrix reports that asking rents rose by 13.5% year over year, 8 percentage points higher than the previous record in 2015. Rent growth clocked in at more than double any previously recorded year as demand skyrocketed. According to a report by Real- Page via GlobeSt. com, net demand for market-rate apartments hit an all-time high at 673,000 units – an eye-popping 66% higher than the record high in 2000. This unprec- edented level of demand pushed occupancy to 97.5% – a rate that could have been higher had it not been for tight supply. COVID-19 restrictions and supply chain issues caused delays in deliv- eries in 2020, the impact of which was certainly felt and exacerbated in 2021. However, approximately 360,000 units were completed last year – more than were brought to market in over 30 years. In addition, of the estimated 682,000 units that are under construction, about 426,000 are expected to be completed this year. Multifamily volume also hit a new peak, accounting for approximately 34% of all property sales in the final quarter of the year, a five-year high, according to CoStar News. Multiple factors contributed to investor interest, including those seeking a hedge against inflation, capital exiting other assets and soar- ing demand. This after a period of several months in 2020 when land- lords were offering big concessions as they fought to keep people from leaving. After the stimulus money kicked in, many feared that the end of the payments would mean mass defaults, but that never happened. However, full-month results, as reported by the National Multifamily Housing Council, showed that rent payments made remained above 90%, with an average of 94% for the year. That’s just 1 percentage point below the 2020 average. n Micro level. A pandemic-spurred mass exodus from densely populat- ed and expensive coastal urban city centers led people seeking a lower cost of living and more space to fol- low the sun and the range to the Sunbelt’s South and Southwest. According to the Census Bureau’s new vintage population estimates for 2021, Florida experienced the largest net domestic migration gains with 220,890. Texas followed with 170,307, and Arizona picked up third place with 93,026. As a result, asking rents jumped by 20% or more in nine of the top 30 metro areas between March 2020 and December 2021, with Phoenix leading the pack, boasting a 31.1% leap, followed by Tampa at 28.5% and Las Vegas at 28.2%. Only three of the top 30 metro areas experienced declines in ask- ing rents during that period – San Jose (negative 4.78%), San Francisco (negative 2.11%) and New York City (negative 0.08%). These three mar- kets remain below pre-pandemic levels. If we consider Yardi Matrix’s uni- verse of 147 tracked metros, Mid- land/Odessa, Texas, is added to the mix with a double-digit decline of negative 22.5% As the year ended, however, some migration trends began to shift again with demand beginning to return to coastal markets. Notably, occupancy of stabilized properties is up in New York City by 3.2%; Chi- cago, 2.9%; San Jose, 2.5%; and San Francisco, 2%. n Colorado . In our corner of the Last year’s pace sets an optimistic stage for 2022 Austin Smith Senior adviser, Capstone Please see Smith, Page 30 Colorado was on the positive side of the population shift with an increase of 38,355 new residents between April 2020 and July 2021. Occupancy data derived from U.S. Postal Service records via Yardi Matrix