Hello!
As we close the first half of 2021, competing trends remain making it challenging to pin down one theme.
On one hand you have the highest values and liquidity the multifamily sector has ever seen.
On the other hand, you have legislative uncertainty and rising labor and materials costs impacting every project.
Read on for more details and how these trend impacts you as an investor and owner in Eastern WA.
Overall Market
- For multifamily owners in secondary and tertiary markets (population under 2M), there are two key factors impacting multifamily values, making it one of the best times in history to consider selling your property. Read more in the multifamily section below.
- Want to see the behind-the-scenes details on every multifamily project under construction in the Tri-Cities? Download the Q2 2021 Multifamily Construction Report here. You’ll find a high-level overview along with details of the 945 units under construction today.
Multifamily
- There are two key opportunities impacting multifamily values today:
- 1) Historically high values. As investors continue to seek yield in uncertain market conditions, multifamily is where investors want to place capital, and they’re willing to pay for it.
- 2) Liquidity in a historically illiquid asset. Investors are valuing multifamily in similar terms across different markets. Projects in the Tri-Cities (300k population) are selling at similar cap rates to some Puget Sound (4.2M population) region sales.
- For owners who have ever thought about selling and maybe buying something newer, in a different market, or even passively investing, there has never been a better time to consider given the values and liquidity in today’s market.
- Following the competing trends theme, the CDC has extended the eviction moratorium until July 31, claiming, “This is intended to be the final extension of the moratorium.”
- For WA owners, Governor Inslee had already announced a “bridge” between June 30 and new legislation taking effect October 1. Landlords and property managers await more details to understand how they can move forward.
- Even with the moratorium extended, rents continue to rise. I recently toured a handful of properties to evaluate their market rents compared to the interior finish quality. If you’re interested in learning more, shoot me an email.
Development
- As mentioned above, you can download the Q2 2021 Multifamily Construction Report here, which reviews the 945 units under construction in the Tri-Cities. Do you own multifamily property in town? You’ll want to see how these new properties may impact your occupancy.
- Are you more interested in Spokane’s development pipeline? That report is coming next month. Stay tuned. Have questions on Spokane new construction in the meantime? Give me a call at 509.221.9354
- Significant headwinds are delaying projects but are not stopping new projects altogether. In addition, every developer I’ve spoken with in the middle of a project is charging forward as quickly as possible, since they see no way but forward to the finish line.
- Most of construction headlines have been about rising material prices but in speaking with local developers, this is not the biggest challenge they face today.
- While materials pricing deteriorates margin, supply chain disruptions causing project delays and labor shortages are not a margin problem, they are preventing projects from moving forward altogether.
- One developer I work with recently hired a new team member, offering them $15/hr to clean up job sites after work is completed. Three days into the job, this employee turned in his notice and said, “I can make the same amount sitting at home.” As a developer, how do you pay more than $15/hr for a non-specialized role? You can’t, especially when you add on the additional material costs.
Have questions on any of the above? Please give me a call to discuss – 509.221.9354
Best,
Mason Fiascone
.jpg)
.jpg)
.jpg)