2024 NMHC San Diego Multifamily Recap Report

multifamily market update February 2024
This past week, thousands of real estate professionals descended upon San Diego to attend the NMHC Apartment Strategies Conference. There, a distinguished lineup of multifamily experts provided insight.

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Here are four main takeaways from the Apartment Strategies Conference

1) Economic expectations:

Inflation is declining towards the Fed’s 2% target. This will result in 3 to 4 interest rate cuts during 2024. Many markets are oversupplied with new housing, but one bright spot for demand is immigration. Over 3 million new immigrants will change absorption dynamics. To follow where the demand is headed, look to affordable destinations. Affordability was cited as the #1 reason people move to a new market.

2) Multifamily forecast:

Jay Parsons, SVP, Chief Economist, RealPage, sees a steep drop off in apartment deliveries in 18 months. He notes that construction delays today aren’t short-term. This will re-accelerate rents once the near-term supply is absorbed. For now, midwestern cities were cited as the winners for 2024. They have the least new supply and a renewed focus on manufacturing could set these cities up to outperform. In general, the renter remains strong with wages growing faster than rents and consumer confidence ticking up.

3) Using tech to provide a better experience:

Data makes everything work. Owners must aggregate, decipher, and implement strategies to use their data. The use of AI will only increase. It’s used now for chat/call bots, delinquency collection, and uncovering common tenant complaints. Standard tech like community Wi-Fi and smart building access are also important. These not only add value to the tenants but are ways of collecting data.

Case in point:

According to Scott Wesson, SVP, Chief Digital Officer of UDR, resident satisfaction increased when their onsite staff was reduced by 42%. UDR believes its focus on data and speed provides a better tenant (customer) experience.

4) Operational and public policy risks:
Insurance costs –

The largest owners are taking insurance in-house through self-insurance programs and creative partnerships. Having scale matters. Master policies from third-party managers can help smaller owners find cost-effective solutions.

Regulatory changes –
The rent control discussion won’t go away and continues to spread. Rent control 2.0 is being marketed as “anti-gouging” with light just cause eviction policies.
Rising operating costs –
Many large owners are now operating in centralized pods for maintenance and have found ways to make the assistant manager role a back-office position.
Looking ahead: In 2024
The latest buzzword—cautious optimism—tempered expectations.
Dominating the sessions were topics on supply, rising costs, and regulations. And, distressed owners were hardly discussed as most believe this to be of minimal consequence.
 
So, we all wait for transactions to increase. In the meantime, we continue to focus on the basics of our business and hope for interest rate certainty.

2024 appears to be shaping up as a year of transition.

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