Why EverWest Is Still Bullish on the Urban Apartment Market

During the pandemic, demand seemingly fled urban markets in favor of the sprawling suburbs, but some investors are still seeing potential in CBD product. Denver-based EverWest, f or one, is bullish on the urban apartment market.

“Most urban multifamily markets are still feeling the impact of the pandemic, particularly for in-place rents, although the tide has started to turn. During the pandemic, most urban landlords had to lower rents and increase concessions to maintain occupancy,” Tyler Williams, director of southeast acquisitions at EverWest, tells GlobeSt.com. However, even in this early stage of recovery we are already seeing rents reset to pre-pandemic levels and concessions begin to taper off.”

Williams has also seen cap rates adjust this year. “We saw some suburban properties trading at lower cap rates than their urban counterparts, but are now seeing cap rate dynamics shift back to equilibrium,” he says.

Urban markets still have room for growth. Vacancy rates are still up compared to the pre-pandemic market, and effective rents have not yet returned to pre-pandemic levels. “That is changing,” says Williams. “As companies begin to reoccupy their downtown office spaces, they are creating a significant catalyst for people to come back to urban centers.”

While the company is bullish on urban markets, not all of them are created equal. “Resident migration during the pandemic weighed heavily away from gateway cities like San Francisco and New York toward inland growth markets, particularly in the Sunbelt cities and other popular secondary markets,” says Williams. “Many of these renters are already urbanites who want to be in the epicenter of activity. They can achieve that with more space, lower taxes, a higher quality of life and lower rent in places like Charlotte, Nashville, Austin, Denver, Seattle and Boston.”

Unsurprisingly, these are also the target markets for EverWest. “We think that the migration trend, and the growth trend for these markets, will be sustained longer term,” says Williams. “From a multifamily perspective, we’re still near the bottom of a cycle within these urban cores. We are securing opportunities at a great time to capture upside growth.”

EverWest recently acquired The Mint, a 178-unit class-A apartment building in Charlotte as part of its urban-focused strategy. It plans to upgrade the exterior, unit interiors and community spaces. “Our investment strategy targets vintage multifamily product that is five to seven years old. These assets usually have relatively new amenities and unit build-outs, so while our renovations are comprehensive they are a lighter lift,” says Williams.

Williams says that the upgrades will include new color schemes and hardware as well as new technology. “Smart home technology is a huge factor for residents. The Mint will respond to these preferences with features like keyless entry, nest thermostats and other cloud-based services that allow residents a high level of app-based control of their living environment,” he says.

Overall, Williams is confident in the future of apartment product in infill locations like this. The challenges during the pandemic were temporary, and is already dissipating. “That dislocation still exists in many central cores and is part of the rationale for our acquisition of The Mint and similar properties,” says Williams. “We have a strong conviction that urban centers are going to not only come back, but will achieve even stronger rental rates than they experienced pre-pandemic—particularly in the Southeast growth markets—and that they will hold that acceleration for the foreseeable future.”