As the economy heading towards the tenterhooks of possible break-down due to the pandemic. Various sectors including multifamily real estate have also taken a big hit.
The big question jumps up: “What’s Next ?”
The COVID19 pandemic has taken the world by storm; disrupting global supply chains, depletion of global GDP, and escalation of death counts, have become the epitome of this crisis. Many countries are adopting social distancing and nationwide lockdown. These are some of the remedies that aim to minimize the responsibilities of the over-burdened health-care systems.
Unlike the USA, which followed social distancing by outlaying policies like to have people shelter in place, shutting down malls, cinemas, etc. These only have a minimal impact on current situations.
According to the research conducted by Moody’s Analytics, it expects US GDP to go down by 6.6% in all of 2020. This looks bad, as they’ve pointed out 4 sectors from which the accommodation and entertainment sectors have hit hard due to the unemployment (21.5 million job losses).
On top of that, states with densely populated and urban areas have seen a massive rise in the COVID cases. With 3,50,000 cases, New-York has become the global epicenter of the COVID.
This combination of economic downturn and the pandemic has made the current scenario look worse than the Great Depression of the 1930s.
However, from a positive side, this is where new technologies and business models will evolve that will shape the future economy, navigating us through these uncertain times.
The US has become a nation of renters. There has been a significant rise in the rental occupancy, especially by young graduates and professionals who wish to go off campuses because it makes more sense in reducing their financial burden of paying a whole-sum amount upfront.
With these insights, construction might halt in densely populated areas due to the pandemic but it can continue building houses outside the city.
This is an indication of change, for the better.
Looking at the current scenario, we could expect a lot of things to come up.
Here are some of the emerging trends or technologies that can assist the multifamily realty sector in predicting the future of real estate markets in the US.
1. Virtual Tours clubbed with Augmented Reality
Now, this isn’t something, an entirely new concept but the reason why this comes under the list is; its potential has grown many folds. There has been a significant rise in the adoption of these technologies by multifamily owners to get more lease permits during this crisis.
Contactless tours are the need of the hour. With these technologies, enthusiastic tenants can have an overall view of the apartment which includes a virtual peek out of the windows and guage the overall surrounding of the apartment where it is housed. Many companies are using three-dimensional computerized rendering of a sample apartment to this affect.
Possible tenants can now have the comfort of checking out apartments just by sitting in their homes sans a leasing agent.
2. Live Virtual Property Inspection
Physical due diligence is one of the most important aspects of real estate investments. Through on-site property inspections, one can analyze the overall condition of the property and give accurate estimates. This is crucial for the underwriting agreements.
Virtual inspection technology via Skype, Zoom, etc. is the one-stop solution for safe and prudent lending practices. However, all virtual inspectors including Freddie Mac, third parties (appraiser and engineers), and Optigo lenders have to conduct this under the Freddie Mac Multifamily Seller/Servicer Guide compliant inspection. ( https://mf.freddiemac.com/COVID-19/ ).
3. Online Leasing
Online leasing has always been on the forefront, for renting an apartment. Nowadays potential home buyers are using this feature more than ever before. Firstly its hassle-free, everything is online and secondly, it is legally backed by the E-Sign Act of 2000 that protects its authenticity.
With the help of this feature, a visitor can easily talk to a leasing agent without going out. It’s similar to a video chat functionality. Websites like apartment.com have made this feature more personalized by educating their customer.
4. Self Guided Tours
This has emerged specifically in densely populated urban areas. The self-guided tour allows house hunters to physically check the apartments and receive all the information about the unit and the community nearby, without the presence of human leasing agent. This is indeed a unique way of practicing social distancing and getting the work done.
5. Digitized PPM
Now private placement memorandums play a crucial role in real estate investment deals. This is a legal document that provides potential investors with full disclosures, based on federal securities law. It outlines the entire investment including investors’ requirements, the commission and fees earned by the Syndicator, and a complete description of the property.
This task is laborious, expensive, and time-consuming.
Digitized PPM has made things simple, as it is designed and developed in days instead of weeks. Many companies are planning to use these to ease up their complex real estate deals.
Although these trends look great and add a bit of optimism, still there is a huge concern for the future of real estate in the US. Needless to say that construction delays, mortgage forbearance, unemployment, rise in COVID cases, etc are expected to bring worrisomely.
Multifamily the realty sector has to deal with these all. However, there has to have a flexible mechanism backed by the emerging technologies that will bring the balancing factor for the unsettled economy.
The next big question: “ Is it enough? ”
Prashant Kumar, CCIM
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