Thanks in part to government assistance programs and businesses’ ability to adapt and pivot, Florida’s multifamily market has in general performed well over the past four months. The majority of our clients’ multifamily properties are holding the status quo in terms of performance, with the exception being those located in markets with a heavy concentration of service workers, where the majority of job losses are being felt. For the most part, occupancy remains high at most garden-style multifamily properties and Class A high-rise apartments across the state, and where there are upticks in delinquencies, that’s been offset by higher retention and renewal rates as many renters are reluctant to move in the current environment.
As public officials in Florida and states across the southeastern United States sought to strike a balance between mitigating COVID-19 transmission and restarting the economy, a rise in new virus cases across the region has tempered expectations of a rapid return to business as usual. Interestingly, though, businesses across the board, from Disney World in Orlando to the restaurants along Ocean Drive in Miami Beach, have re-tooled their operations to adapt to the new normal – incorporating social distancing and mask mandates as required – in an effort to bring people back to work as safely as possible.
While multifamily acquisition activity in Florida slowed between March and May, transaction activity picked up again in June, with no signs of distress or discount in pricing. Despite the prevailing mood of uncertainty and economic volatility, the sheer amount of pent up demand for multifamily assets among institutional and small investors alike, and multifamily’s strong performance relative to other asset classes, continues to bode well for the sector.
The GSEs, life companies and banks are all actively lending, as well as Freddie and Fannie, and rates are at all-time lows helping offset some of the stress. Given the low interest rate environment, we’re encouraging our clients to review their entire portfolios and lock in to long-term, fixed-rate financing on new loans, or take advantage of interest rates in the low or sub 3 percent range to refinance. Conversely, if the property is not part of a long-term hold strategy, now is also a good time to sell, with plenty of capital waiting in the wings.
Although deal volume will be lower this year as many opportunistic investors wait on the sidelines for signs of distress, so far investor appetite for multifamily has kept prices in Florida strong. Many deals that had stalled or fallen out of contract earlier in the year moved forward this summer when businesses reopened and the economy appeared to be on the rebound. Although those expectations may have been premature – at least for Florida – there’s still a tremendous amount of optimism that this too shall pass, particularly as efforts to develop a vaccine proceed. Regardless of the challenges ahead, people will always need safe, reliable housing.
– Mitch Sinberg, Senior Managing Director