Multi-Family Loan Servicing - Bay Area - San Francisco

6 Takeaways from the Multifamily Forum | San Francisco Bay Area

November 9, 2017

Multifamily is still a hot commodity – investors, developers, lenders – it seems like we can’t get enough of this product type but we are hearing some cautionary tales as we approach 2018 and continue a long running bull market. Here are my 6 key takeaways from attending the Multifamily Forum San Francisco Bay Area event held this week in Foster City:

  1. Know the difference between Class A, B, and C quality properties and which are best for a recession (and subsequent recovery). Hint: no one builds Class C, but these have no vacancies when times get tough.
  2. Cap rates (and the basis point margin) between primary and secondary markets has dramatically narrowed in recent years. More dollars are funneling into secondary markets as investors search for greater yields. Private money moves here first but REITs and institutional money is keeping a close eye on it.
  3. Say hello to generation z, they’re the next millennials when millennials finally decide to move out. This group will bring similar demographic trends and keep demand high in urban areas. Both generations look to be long-time renters as home ownership remains a challenge.
  4. The biggest multifamily construction concern? Cost of labor. Developers will look to new construction materials, techniques and innovations in order to combat higher construction costs. Labor laws and immigration policy will play a big part in this.
  5. Ride-sharing and decrease in car ownership is making a difference. Expect radical new property concepts and redesigns. Parking lots and garages will be cut back or eliminated completely in order to make way for more living space.
  6. The old adage “cash is king” still reigns supreme on acquisitions but so does “certainty of execution” when you need financing. Sellers are entertaining multiple competitive offers on projects. Make sure you and your lender can move quickly when the time comes. Look for financing options that can line up competitive permanent solutions rather than relying on expensive bridge options.

We look forward to seeing you at the next Multifamily Forum or Commercial Real Estate event.

Andrew MacLeod
Commercial Mortgage Banker