July 2020 Edition -What’s Next for Multifamily in the Southeast?
(Prepared for Multifamily Owners and Prospective Owners)
Coronavirus pandemic, shutdown of the entire county, nationwide race riots, anti-police demonstrations, protesters marching with automatic rifles, destruction of public and private property, removal of historical monuments and statues, police officers calling in sick to avoid the chaos, governors and mayors keeping businesses closed down and not taking a firm stand with the protest in the streets, some even calling for the defunding of police departments. Are we ever going to get back to a normal environment? You need a crystal ball to answer this question and, as you can see, I have one. Problem is it is full of air bubbles and you can’t see a thing.
Here’s what I think though. Before all of this started, we had the strongest economy our nation has ever experienced. Employment was at historic highs for all races and genders and we expected 2020 to be a stellar year. There was some concern of a potential general recession but, at least for our multifamily market, fundamentals were strong and the end wasn’t in sight. Then came the coronavirus and the shut-down of our economy accompanied by the race riots and anti-police protest resulting from the police killing of George Ford in Minneapolis. So, how do we stop this downward spiral and what is the outlook for the second-half of 2020 and for 2021 for our economy and country. And, more specifically, what’s next, for our multifamily market in the Southeast?
From my perspective, I think we in the Southeast need to get ready for a boom! Here’s why I think this way. Before the coronavirus pandemic the Southeastern States were among the darlings of forward-looking multifamily investors. Investors saw in our markets prices that could be negotiated to reasonable levels, CAP rates that were higher than most other growing areas of the country, returns-on-investments that were acceptable, occupancies that were in the 90%’s and, most importantly, growing economies with job opportunities and growing populations.
Our State Departments of Commerce and our regional and local Economic Development Organizations are doing an excellent job of recruiting new industries and businesses to our areas. Their efforts combined with our centralized location on the east coast (over 50% of the U.S. population lives east of the Mississippi River), our transportation infrastructure designed for both domestic and global markets via land, air or sea (North Carolina has four international airports, 1,296 miles of interstate highways, and two sea ports; South Carolina has three international airports, 862.6 miles of interstate highways and one sea port; and Virginia has three international airports, 1,118 miles of interstate highways and three sea ports), the pro-business environments in our States, the low corporate income taxes, a favorable legal and regulatory climate, low business cost, a qualified and available workforce, and a quality of life with a comparatively lower cost of living, top-notch health care and extensive educational structure has resulted in North Carolina and South Carolina being rated by publications such as Forbes, Site Selection, Chief Executive Magazine, and CNBC as the “Best State for Business” and the “Top Competitive State for Business”. All of this results in our Southeastern states being leaders for business and population growth. Combine all of these positives with the fact that the coronavirus has created a movement of businesses and people from larger, denser urban areas in the U.S. to smaller secondary and tertiary markets in the Southeast provides us with the platform for continued population growth. Bottom line: Everyone needs a place to live and, barring a second flare-up of the virus, commercial real estate fundamentals in the South are positioned for a rapid recovery. As the cost of homeownership has remained unattainable for many, the price of a home relative to income continues to rise. The inability to afford a home will continue to support our multifamily market for years to come.
I have had multiple investors ask me over the last few months what I thought about our Southeastern market after the coronavirus and over the long run. I have said to each of them that I don’t believe you can make an informed investment in multifamily housing in the Carolina’s or Virginia right now or sell a property to upgrade your portfolio with a superior property that you will not make money in the next 5 to 10 years. And, that 5 to 10 years from now you will wish you had bought more. The only limitation will be in the number of properties available to purchase. So, let’s get busy and make it happen. Don’t let the doomsayers get you down. There is no reason for multifamily owners and investors to be anything other than optimistic about apartment properties in the Carolina’s and Virginia.
“Just-In-Case You Missed It” is a monthly letter prepared for multifamily owners and prospective owners. It is a compilation of multiple articles from multiple sources or a reprint of an article from a specific source (source credit given). Its purpose is to present both facts and opinions that may influence our multifamily business in the Southeastern U.S. If you have any questions and/or would like to discuss any of the comments above, my conclusions or your multifamily business, please contact me at your convenience. I can be a valuable resource to you without adding any expense to your budget. I look forward to speaking with you and having an opportunity to meet with you. I am always at your disposal to assist you with your multifamily business. If you would like to review previous editions of my monthly “Just-In-Case You Missed It” letter please refer to articles on my LinkedIn site.
Respectfully,
Rick
G.F. Rick Baker, CCIM
Multifamily Specialist/Investment Advisor
www.RickBakerMultifamily.com
2504 Tinderbox Ln.
Greensboro, NC 27455
Cell: 336.549.6083