At the start of the year, prior to the onset of the COVID-19 pandemic, Berkadia research found that the Washington, D.C. multifamily market was among the healthiest in the country. This was due, in large part, to expanding employment and increasing homeownership costs, which have boosted rental demand throughout the area. However, despite this strong start, the DC Metro—like the rest of the country—has felt the considerable economic effects of the pandemic.
The area’s robust submarkets are anticipated to weather current economic uncertainty, largely thanks to the crucial and immediate assistance provided by both the public and private sectors. We’ve been proud to see our entire community band together in support of our local businesses and residents through financial assistance bills and generous donations to foundations for food, housing and emergency assistance programs.
Adapting for Continued Strength
Throughout the D.C. Metro-area new leasing activity is down considerably, but operators are finding ways to adapt through new and creative leasing tools and strategies. We also remain optimistic, as rent collections have performed surprisingly better than initially anticipated. Based on frequent communication with the area’s largest management companies, D.C. area rent collections have tracked similarly to that provided by the National Multifamily Housing Council’s Rent Payment Tracker. NMHC reports collections as of May 27 averaged 93.3 percent for professionally managed communities nationally, 1.6 percent higher than the same period in April.
Local property values are showing some signs of stress where revenue collections are strained, and existing loan terms are of higher risk. However, any deviation from pre-pandemic values is highly dependent on the economic resiliency of the submarket, social vulnerability and quality of the individual asset. For example, we have seen strong lease-up performance in newly constructed well-located Class A properties with a more affordable price point. As a result, as leases terminate, some residents have begun prioritizing and seeking more affordable housing alternatives, which offer the same quality and level of amenities but are slightly further from core locations.
Rainbows to Come After the Rain
We are all currently faced with a dark storm cloud of uncertainty around how deep and long this pandemic will impact our economy. We have seen effects within the commercial real estate industry, specifically—especially in how we are able to conduct business—but the amount of business we are still able to get done has given us a little sunshine peeking through those dark clouds.
Professionally, we all know that staying connected, available and informed on the latest developments are all key right now. As such, I have found myself doing more listening before offering advice. In times like these, it is critical for all of us to remember that each client has unique needs and human concerns. A sincere ask of “how are you doing,” and compassionate response, can go a long way to help clear a storm you might not know is brewing.
Remaining Connected Despite the Distance
With remote work and social distancing, we are all finding out how truly challenging—but simultaneously vital—it is to stay connected with one another. I have found that video chatting with my friends and family and going on daily walks in my neighborhood have allowed me to remain connected to my community in a time when that feels harder than it should. Maintaining this sense of mindfulness is critical to my satisfaction, productivity and general happiness during these long days. I encourage everyone to take that time for yourself: set those meetings, make that small talk, participate in a virtual religious service and really work to give back to the community that has given you so much.
After all, I know my local community and Berkadia team wouldn’t be the same without our support of each other in these trying times. Taking the time and looking for ways to spread this same sense of camaraderie amongst colleagues and neighbors is essential. If we all work together, I know we can strengthen the resolve of each and every local community and pull through this hard time. It might seem impossible, but nothing really is if we tackle it together.