Bullish at M&M’s Multifamily Forum But Lack Of Middle-Income Took FocusJanuary 08, 2019
BOSTON–Over four hundred professionals packed the Boston Marriott, Cambridge, for Marcus & Millichap’s fourth annual Multifamily Forum to analyze the past 12 months and forebode its immediate future.
“It’s going to get crammed around here,” reported John Sebree, FVP and National Director of Multifamily for Marcus & Millichap. Sebree lured the audience with bullish trends, sighting apartment investment yields of 5.8% versus treasury returns of just 2.3%; in addition to just 3.5% vacancies in Greater Boston. “The trend nationally has seen empty-nesters continuing to move back to the city while the millennials are moving out to the suburbs ... there is an urban growth but it is coming from an older generation,” assured Sebree.
Regardless of where the demand is pressing from, Sebree insisted there isn’t enough inventory in the city. “We’ve seen 240-thousand new jobs and only 42-thousand new units in the market ... Boston is a fantastic city with job growth, education and technology ... but how do we get more workforce housing? ... that is the goal,” Sebree distressed. It was a sentiment echoed throughout the morning session.
Sitting on the panel dubbed, The Big Question: A Developers Forecast on New England, Jonathan Davis, CEO of The Davis Companies affirmed the massive metro shift. “We are experiencing the biggest urban flight since the industrial revolution ... Boston is loaded with quality and highly educated people ... it’s strength upon strength and we have the capital to fund the strength and its growth,” capped Davis.
As the panelists nodded their heads, confirming the high-times and the stable asset-class, particularly in the hottest development area of the Seaport, the audience had the opportunity to text questions to the development panel. Several times the concerns for affordable units were raised. In particular, one repeatedly stating, “we have a crisis on workforce housing ... we still don’t have enough ... why do we keep pretending that workforce housing is going to magically get built,?” asked a texter. The open forum made for a healthy debate as to what is considered workforce housing.
Tinchuck Agnes Ng, Managing Director & Co-Head of Investments, for Cottonwood Group, the developers of Echelon, one of the many luxury Seaport condominium projects, said their group is responding to the desires of buyers. “We now need to create a sense of community to residents ... to provide an experience of a full lifestyle perspective with a mix of retail and condominiums within hot money investments.”
Sue Hawkes, Managing Director for The Collaborative Companies, the group marketing Echelon, assessed their project was built as affordable. “We have an affordability challenge in the Seaport ... there was no product on the market for 25 to 35-year-olds other than expensive rentals. We looked at [marketing] units for $1 Million to $1.5 Million for purchase,” she affirms.
Sandi Silk, SVP/Development Partner for the Jefferson Apartment Group spoke of their success by developing luxury in tertiary cities within walking distance of transportation, along with propviding other high-end amenities. “Transorient development is happening outside Downtown ... We’re creating an urban development but in smaller cities (Malden, Everett and Revere) with all of the luxuries of the Seaport ... but at an affordable rate ... and 22,000 square-feet of outside amenities as well.”
Davis confirmed the success and referred to these secondary urban developments as “Streetcar suburbs,” as he mentioned progress in, “JP, Savin Hill, and Downtown Malden - all variability in placemaking.” “We will look back and say this period in metropolitan development is the redefining period ... we have millennials and empty nesters competing for the new urban products ... it is a range in population that wants to be in the city,” he insisted.
As the panel was drawing to a close, the questions and concerns of affordable workforce units in the city remained on the screens above the group, which seemed to hover as a mystery while Keynote Chuck Leitner, CEO of Berkshire Group prepared to address the audience. Leitner took little time acknowledging the elephant in the room. “The crisis is real in relation to middle-income housing ... and capital is looking to be introduced to an investment manager that doesn’t lie.” he relayed. “Everyone is looking to get a little more margin to develop ‘affordable’ - but what makes sense in terms of relative performance,” Leitner asked rhetorically. For us we have clients that pay high rents because they have high-paying jobs, he candidly assessed.
Leitner concluded his talk with John Sebree, confirming his commitment to multifamily investments and its new products. “I truly believe in this sector. It continues to be bearish, not compared to five years ago but certainly compared to other sectors.” We’re looking at new products all the time. Right now the co-living concept is taking off - where people get matched with roommates ... you share the rent inside the box with no living space - just bedrooms and common areas. The amenities are technology-driven with events, matching, local amenities. The dilemma for landlords is how to offer or fit it into their portfolio,” concluded Leitner.John Sebree and Chuck Leitner