Colorado-Real-Estate-Journal_369935

November 2023— Multifamily Properties Quarterly — Page 3 www.crej.com MULTIFAMILY: INVESTMENT We treat your asset like it’s our own. 720.236.1400 NewBusiness@AssetLiving.com From property preservation to cost savings, we’re determined to maximize NOI at every opportunity. W e are entering the first inning of the multifamily housing buying opportu- nity we have been waiting for. The historic multifam- ily supply, coupled with tightening capital markets, is creating moti- vated sellers needing to liquidate and harvest capital. We are already seeing an uptick in opportuni- ties and expect the next six to 12 months to bring a flurry of sellers to the market. In this time of cautious optimism, I’m reminded of Warren Buffet’s advice to “be fearful when others are greedy and greedy when others are fearful” and its timely relevance for multifamily inves- tors. For those with the conviction to push through the headwinds, we could be moving into the best buying opportunity since the Great Recession. n Shaking the apple tree. If we zoom out and look at this from a macro perspective, we believe the economy will dramatically slow down through first- and second- quarter 2024, even if we don’t go into a full recession. There’s an array of headwinds that will likely slow economic activity next year. While that creates difficulty in many industries, it may actually “shake the apple tree” for opportu- nistic real estate investors willing to get creative and buy in high-growth secondary markets. We’re keeping a close eye on the confounding fac- tors creating a volatile environment and looking for the silver lining within these headwinds. Pushing through the headwinds • Geopolitical tensions: The war in Ukraine and the ongoing instability in the Middle East pose a risk to the global economy and could lead to higher energy prices and supply chain disruptions. • Global econom- ic slowdown: A recession in China or Europe would have a negative impact on the global economy and could lead to job losses and lower demand for U.S. goods and services. • Capital markets: Although we think we’re at the peak of the Fed- eral Reserve tightening cycle, the upward pressure on borrowing costs is making it hard to pencil deals. • Inflation: Despite the Fed’s aggressive interest rate hikes to mitigate inflation, it still remains higher than the goal of 2%. The tight labor market further contrib- utes to inflation with employers paying higher salaries to keep or recruit talent. • Politics: The looming govern- ment shutdown, federal debt levels, and general political volatility, have created a challenging environment for businesses and investors. While these headwinds can’t be understated, we still believe multi- family investment is the best place to put capital in this phase of the cycle. The key is to identify mar- kets that continue to have strong demand, high barriers to entry and outsized home value growth. Our focus is on the secondary markets throughout the Intermountain West region that continue to exhibit these strong fundamentals. n Demand is still strong. One of the key factors driving demand for multifamily housing throughout the Mountain States is the tight labor market, with an estimated 100 jobs open for only 75 workers to fill them. This labor shortage serves to drive up housing costs and, along with rising mortgage rates, makes homeownership unattainable, encouraging tenants to stay put in rental communities. Despite the impact on inflation, we’re still see- ing very low delinquencies and col- lection losses, signifying that ten- ants are financially stable and con- tinue to afford their rent in these markets. Although we can all agree that we’re in a volatile real estate market overall, these factors indi- cate stability and instill confidence in our multifamily focused acquisi- tions strategy. n Supply challenges. The historic amount of apartment supply being delivered over the next year will no doubt increase vacancy and impede rent growth in many markets. With that in mind, we continue to believe firmly that the Mountain States are home to secondary markets with the highest likelihood of rent and occupancy stability. Originally a result of the post-COVID-19 remote work transition, these markets have seen sustained population growth as people move from larger metro areas in search of space, quality of life and relative affordability. The upside of uncertainty is a buying opportunity Kevin Brinkman Co-founder and CEO, Brinkman Real Estate Please see Brinkman, Page 24 Connor Jones, real estate analyst, Brinkman Real Estate Key secondary Intermountain West markets have fewer units per capita than larger MSAs due to lack of new construction and large population growth in recent years.