The state of the U.S. economy is experiencing notable changes, and the multifamily industry is no exception. Following a period of rapid expansion, the market is exhibiting signs of deceleration with oversupply affecting the Phoenix Metro multifamily sector for the first time since 2011.
Amidst increasing supply side pressure, developers, operators and property management companies must understand how to work through long-term cycles occurring within the multifamily industry. Such shifting economic conditions separate investment managers who provide 5-star services and products from those who rely on a strong market to boost their organization’s performance.
As an asset manager, here is how to successfully and effectively navigate through these cycles as well as the shifting economic landscape.
Understand the current landscape
In multifamily, it is important to remember that we are never bigger than the market. During the past two years, apartment fundamentals were overheated and unsustainable. This is reflected in the data with surging supply and economic turbulence continuing to create downward pressure on market fundamentals. Headwinds include:
Supply-side pressure near term
Decelerated transaction activity as cost of capital continues to rise
Increasing cost of debt which is further complicating ownership attempting to refinance or place permanent debt post-stabilization
Global macroeconomics, geopolitical uncertainty and U.S. economic conditions in play; a recession is likely looming whether it be a “soft” or “hard” landing
Adapt to ever-evolving market trends
As a market, the peak is behind us. Adapting to ever-evolving market trends in multifamily requires a willingness to embrace change and a commitment to staying ahead of the curve to meet the desires of your resident base. Doing so entails staying abreast of new trends, technologies and shifts in the market, while being able to pivot and adjust business/operational strategies accordingly.
To satisfy the consumer preferences of both clients and customers, it is vital to create an environment that meets their needs.
Build strong relationships
Transparency is the key to building trust and establishing positive relationships with investors. Although consistent conversation is necessary in all partnerships, it is vital to strategically prepare for 2024 headwinds.
Building strong relationships is critical in the multifamily industry, especially when working through long-term cycles. These relationships can help you weather difficult market conditions, and they can also provide you with valuable insights into market trends and conditions.
Use data-driven strategies
Understanding your market’s trends and economic data across submarkets is a critical component to navigating projects, specifically those in the lease-up phase. Diligently tracking key ancillary macroeconomic indicators on a monthly and quarterly basis will aid in the forecasting of market influences. This approach empowers you to make proactive, informed strategies and decisions that set your assets up for high performance in their area.
Prioritize integrity and ethics
When faced with economic challenges, it can be easy to lose sight of your mission and vision, and in turn, become hyper focused on short-term gains or survival. By staying true to your core values, you can remain grounded in your long-term goals and more effectively navigate difficult economic conditions.
Staying in tune with where you are headed and where you want to go as an organization is the key to seamlessly balancing the needs of your business and the needs of your residents and team members. People want to work for and with companies that share their values and beliefs, prioritizing integrity and ethics in their business practices. This is how Mark-Taylor has created exceptional communities that invite, inspire and feel like home for nearly four decades.
ABOUT THE AUTHOR
John Carlson, President of Mark-Taylor Companies, has dedicated the last 21 years of his career to the organization. Through his strategic direction and expertise in macroeconomics, John has scaled Mark-Taylor to its largest size in the company’s history while increasing employee engagement. He credits the exceptional people and the authentic and ambitious culture at Mark-Taylor as the keys to the company’s continued success.