Are We in a New Normal or a Moment in Time?

LOS ANGELES—Covid reminded investors that predicting the future is nearly impossible, so understanding the present is key to making informed decisions. Those thoughts came from a “Behind the Deal & Institution Insights” panel moderated by Cushman & Wakefield’s Marc Renard at the national GlobeSt. Multifamily conference here in Los Angeles. 

According to Renard, we are in an unprecedented era of capital, US suburban expansion markets have all the momentum and multifamily and industrial are pretty much the only game in town. So is this the new normal or just a moment in time?

“The aggressive pricing and capital has been focused on multifamily and industrial. We are at a moment in time in terms of this kind of pricing,” said Rodney Chu of UBS Asset Management. With the uncertainty of underwriting other product types such as office and retail, he expects to have capital that continues to be focused on industrial and multifamily in the future. “As you look at these yields and cap rates, I think there will be pressure on investors to broaden their horizons.”

Because spreads have come in so much, in order to achieve the kinds of promises made to investors, more risk might have to be taken in today’s environment, panelists noted. “We have to pay a lot more attention to the borrower on the credit side and it requires more work,” explained Paul Keller of Mack Real Estate Development. “I like to think of this time as a moment in time where I think we all really have to be eyes wide open because there have just been so many events that none of us have ever experienced before. These are unprecedented times.”

As far as current strategy goes, Equity Residential has gone through a series of strategic changes. “We really got focused on the core coastal gateway communities and for many years, we were selling out of the middle part of the country,” he said. A few years ago, the company made a decision to reevaluate getting back into some markets to try to focus more on diversification again. “We decided we didn’t need to get into a lot more markets but a selective few and still stick to the strategy of seeing affluent renters. “We are in a great time in the multifamily business. A lot of that really is because of the great fundamentals and how quickly we recovered from the recession from Covid.”

Check back with GlobeSt.com in the next day or so for more from this panel and more coverage of the GlobeSt. Multifamily conference.