Soothing Multifamily Tenants' Fears About Pathogens Isn't Insurmountable
The coronavirus pandemic derailed the multifamily industry after years of steadily rising rents, occupancy rates and robust new development. But after hunkering down throughout the late spring and summer, providers say they were able to keep buildings filled and are now ready to meet new demands from safety-minded tenants.
But COVID-19 may have struck at the worst possible time for the industry, right in the middle of the spring renewal season, making any response especially difficult.
“That’s typically when we’d be able to push rents,” Golub & Co. Senior Vice President Stephen Sise said last week during Bisnow’s Chicago Deep Dish: Market-Rate Multifamily webinar.
The future of multifamily may still be bright, as the most important demand renters are now making is for advanced HVAC systems that can neutralize airborne pathogens, according to Bond Cos. President Robert Bond. That technology is available, and the cost won’t add much to the budgets of major multifamily developments.
“That’s a good thing to do, regardless of COVID,” Bond said. “The solutions are there, and it’s not a big ask or a big lift for anyone to do.”
W.E. O’Neil Senior Vice President, Operations Damian Eallonardo said adding such advanced filters, some of which treat circulating air with hydrogen peroxide to kill pathogens, is not nearly as complicated as changing ductwork or a physical plant’s location.
“This is just enhancing the physical plant to make sure you’re killing as many germs as you can before you're pushing air out to the units,” he said.
As the pandemic stretched into the summer, few renters were prepared to move into new units, Sise said, and Golub & Co decided its best strategy was to do whatever it took to maintain occupancy. That required tough choices.
“The best way to maintain occupancy, unfortunately, has been to be ultracompetitive in rental rates,” he said.
Other firms adopted the same strategy.
“We don’t want to give away the ship, but we also don’t want occupancy to drop by 20%,” Time Equities Director of Acquisitions Brad Gordon said.
Many of Time Equities' multifamily properties are in secondary markets across the Midwest and Southeast, where rent collections have typically been more than 98%. But in New York City, the situation has been the polar opposite, he added, where hundreds of thousands of renters have left the city, and some providers are offering several months of free rent to maintain their occupancy rates.
Time Equities analysts anticipated that the pandemic would result in high rates of delinquency in many developments, but their worst fears did not come true.
“Surprisingly, it’s been the opposite,” Gordon said.
