President & CEO Rick Graf moderated a panel discussion about the “State of the Multifamily Industry” at the Crittenden Multifamily Conference last month in Dallas. Panelists included Scott Wilder, Executive Vice President at Lincoln Property Company; Stacy Hunt, Executive Director at Greystar; and Carlos Vaz, Co-Founder & CEO of CONTI Organization.
The hour-long session opened with panelists talking about capital investments, cap rates, interest rates and the underwriting process over the past year. Discussions revolved around the positive outlook in multifamily, which is still targeted by a significant amount of institutional investment capital. Cap rates are holding low and steady, and the panel didn’t believe there would be a significant uptick. They also didn’t feel that the incremental rise in interest rates would have an impact at this time. Investors have the money, they are underwriting, competitive and optimistic, the panel said.
In the next segment, panelists gave high-level overviews of trends on rent growth, occupancy and expenses in the Dallas, Houston, Austin and San Antonio markets. On average, they said, 2017 saw strong occupancies with a three to five percent increase in rent growth for non-core product. Core product trends, however, remained flat while the velocity on new lease-ups slowed.
Additional conversation centered on the lack of available personnel in the industry and the best ways to attract and retain top talent. Panelists described how they are being forced to think differently about compensation structures and benefits to attract top talent, and particularly millennials, in all job categories.
On the topic of technology, smart home amenities and virtual concierge services remain relevant. The panel discussed how online payments, as an amenity, has become the norm and is being used at nearly 75 percent of the properties.
The panel wrapped with a discussion about affordability trends and how this is not just a coastal issue. There has been an increased percentage of income to housing costs impacting all product types in Texas, including Class B and C assets. It was mentioned how the housing model could potentially move toward a hybrid model of conventional and affordable in the same development to offset costs. Rent growth has outpaced wage growth, causing people to feel the pinch. As an industry, however, it was discussed how rent control is not the solution as it impacts new development. To overcome the crisis, new models are being developed in workforce housing to accommodate the teachers, police officers, and others who do an important job but whose pay is not in sync with rising rents. There was also conversation about co-living models in larger markets, like New York City, to keep costs down. These hold similarities to student housing in the sense that residents share common areas in one large apartment but have separate bedrooms. This was recognized as a very timely conversation.