It is impossible to talk about multi-family investing trends in 2021 without reflecting on the year that was. During most of 2020, and going into 2021, our lives were dominated by the COVID pandemic. The pandemic had an immediate and dramatic impact on how people live and work. It also affected the economy. The ripple effects of the pandemic, and the trends and impacts that have emerged, are yet to be fully seen.
As cities went on lockdown and people started working from home and educating their children at home, no one was unaffected. I’m sure that research will clearly show what we already know anecdotally - we went from being social butterflies to caterpillars in our collective cocoons overnight. People had to adapt to living and working under the same roof, dining room tables became school rooms, couches and coffee tables became offices. For tenants living in rental apartments, this was brutal. What was previously enough space to come home to after a day in the office, was suddenly a cramped and unworkable space as they had to factor in all the new uses they were putting their spaces to.
Owners and investors in multi-family commercial properties cannot ignore these. In apartment buildings and complexes they already own, or those they are looking to acquire, it will be necessary to consider improvements and renovations that maximize work- and school-from home amenities, such as hard-wired Ethernet, desk or office nooks, in-unit laundry facilities, and refrigerated package lockers, to mention a few.
While there has been some indication of an urban exodus, as desperate city renters moved to the suburbs or rural areas to get more space and a breath of fresh air, the extent is still being assessed. Only time will tell if the trend continues. The consensus is that a growing number of workers will continue to work remotely (which in theory allows them to be located away from large urban centers if they wish) but that large urban centers are not expected to be heavily affected as the same amenities that attracted them to city life will continue to be attractive.
I believe that investing in commercial multi-family properties in the value-add niche will bring the biggest gains. Apartment buildings and complexes that have opportunities for value-adding renovations, particularly to accommodate tenants’ changing needs, will have the best chances of appreciation and strong returns. Another reason the value-add niche could be valuable is proposed tax legislation that will bring tax breaks to owners of multi-family properties with more than 4 units that introduce environmentally friendly features in the building.
As the roll-out of vaccines continues, and society starts to return to some form of normalcy, there is reason for hope. While 2020 did see a rise in unemployment and temporary slow-down of economic growth, jobs are already starting to come back and the US economy is expected to return to its pre-pandemic growth trajectory. Interest rates also continue to remain low. Expectations are that real estate transactions in the commercial multi-family space, which slowed slightly during 2020, are returning to pre-pandemic levels. Here at Kennedy Remedy Investments, we are already on the lookout and ready to capitalize on the investment opportunities that we find. Join us for the journey!