Archives for December 2020

In five years, hiring managers expect that 22.9% of workers will be remote

The number of remote workers in the next five years is expected to be nearly double what it was before Covid-19: By 2025, 36.2 million Americans will be remote, an increase of 16.8 million people from pre-pandemic rates, according to Upwork’s Future Workforce Pulse Report.
Hiring managers predict that people will gradually continue to return to the office, with only 26.7% of the workforce fully remote in one year. In five years, hiring managers expect that 22.9% of workers will be remote. One-third of workers will be working remotely at least some of the time in the long-run. By comparison, only 12.3% were working remotely before the pandemic.

There are, of course, competing theories about who is returning to the office and when. One theory was recently put forward on On CNBC’s “Power Lunch,” when CBRE CEO Bob Sulentic predicted that 80% or more of occupancy will come back to offices.
But many of those employees may be working in different types of spaces in the future. Sulentic expects companies to employ hybrid strategies where they could continue to allow employees to work at home for a few days a week or even go into flexible spaces that function as hubs.

As evidence of this trend, Google’s CEO Sundar Pichai announced in an internal email last week that the company will be piloting a flexible workweek in which employees come in three days for collaboration and work at home two days. This plan should go into effect after employees return to work, which is now scheduled for September 2021, according to the New York Times.
Pichai said the company is testing the hypothesis that a flexible work environment would lead to “greater productivity, collaboration, and well-being,” according to The Times.
However the future of the office plays out, the pandemic has proven that remote workers can be productive. Nine months into the lockdown, 41.8% of the American workforce remains fully remote, according to Upwork. Right now, 56.8% of Americans are still working from home, at least some of the time.

Sixty-eight percent of hiring managers say remote work is going more smoothly now than at the start of the pandemic. Only five percent said remote work was working worse than at the beginning of the pandemic. One-third of the respondents said it was working much better.
“Increased productivity and flexibility continue to be key benefits of remote work: Hiring managers cite reduction of non-essential meetings, increased schedule flexibility, and no commute as aspects of remote work that have worked better than expected,” according to Upwork.
Source: “The Number of Remote Workers Could Double in Five Years“

This year has provided the chance to hone our communication skills and serve fully as the voice of leadership.
It’s time for a true confession: I learn much better face-to-face than I do virtually. Of course, face-to-face meetings take more time. Between travel, delays in start times and the required networking, there’s something in the “live” immediacy that conveys the messaging much better for the way I absorb information. That’s just me, although I suspect I’m not alone in this preference.
However, we now live in a virtual world. Meetings and conferences have all gone virtual. It’s only one of the many ways the COVID-19 pandemic has inspired us to pivot and push beyond our comfort and preference zones.
Here’s the odd dynamic of the coronavirus pandemic . . . the discovery of new tools, methods, and capabilities. We’ve seen some good emerge from the past nine months, and even though the real estate portfolio or earnings growth we had expected coming off of the 2019 growth trajectory never materialized, there’s been serious growth in the capabilities of professionals who dared look the situation square in the eye.
Want proof? Wendy Becker, J.D., vice president of Knowledge Solutions for the Institute of Real Estate Management, reports that we’ve seen a 30 percent increase in online course enrollments this year compared to 2019. What that says about member interest in advancing their careers—despite the many challenges they face in their support of residents and tenants—speaks volumes about professional commitment and interest in ongoing education.
One of the most severe challenges real estate professionals have been facing is time. No matter the asset class—retail, office, industrial or multifamily—time has not been on our side. Property managers were already on call 24/7 before we ever heard of COVID-19. Juggling the day-to-day responsibilities that have always been part of the manager’s tool chest was a career in itself. Add to that the necessity of being the voice of guidance and leadership for our residents and tenants in the midst of changing protocols from the CDC and from our local, state and national governments, then the tasks at hand seem to verge on the impossible.
Yet there are opportunities my industry colleagues have embraced. This year has provided the chance to hone our communication skills and serve fully as the voice of leadership—especially when faced with tenants and residents who’ve hit on hard times and struggle to meet their rental obligations. Dealing with the economic reality brought on by the pandemic is not business as usual, and it takes a special talent to keep all the stakeholders pulling together. Nowhere is the concept of being in this together more true.
Speaking for my own firm, our success rate with rent collections has actually increased over 2019, a clear indication of our relationship with tenants and residents and our communication skills. Despite images to the contrary, no one wants to see the lights out anywhere. As president of IREM, I talk with colleagues around the country, and so once again, I know I’m not alone.
The advancement of technologies has become another area of opportunity. Already high on the wish list of most property managers, new technologies—from seamless accounting systems to UV lighting in elevators and touchless fixtures—have also advanced, adding yet more tools to the property manager’s toolkit. Needless to say, videoconferencing services such as Zoom or Google Meet have skyrocketed in their usage as well.
Is there more to learn? Absolutely. Earlier I mentioned the time factor. I’d like to see a broader embrace of work/life balance, a critical consideration in this age of never being unplugged, and it’s a concern not limited to property managers. We’re all too tied to our devices, which keeps us working without the mental break we need to be our most effective at whatever our career demands are. Where do walks fit in these days, petting our dogs or just being with family? To use another tired phrase, we’re no good to others if we’re no good to ourselves.
Watching the current spike in cases, it’s evident the COVID-19 virus will remain with us for some time. Some protocols will go away and maybe we won’t need so much plexiglass down the road. But certain newly honed skills will remain, such as reasoned compassion in our communication and a greater awareness of balance in our lives.
As we swing into the new year, that’s my hope for all of us.
Chip Watts, CPM, CCIM, is the 2021 president of the Institute of Real Estate Management. In addition, he serves as president and executive CPM for Watts Realty Co. Inc., based in Birmingham, Ala.
Source: “Property Managers Have Found Opportunity and Growth Amid the COVID-19 Pandemic“

Tired of waiting for discounts, investors have come off the sideline to snap up assets in a year-end rush of deals.
Apartment investors are in a hurry to make up for lost time. They are trading billions of dollars in apartment properties—a pace of activity that’s double or even triple the volume of sales from the fall.
Buyers and sellers have closed deals despite the coronavirus pandemic worsening in the U.S., with hundreds of thousands of new cases confirmed daily and the death toll now reaching more than 3,000 in a single day twice this week.
Buyers and seller are closing deals regardless as they resolve disagreements about what apartment properties are worth in the pandemic. Fights between would-be buyers and sellers stalled transactions for most of the spring and summer.
“We are making up for a very slow second and third quarter,” says Kris Mikkelsen, executive vice president in Walker & Dunlop’s property sales group, working in the firm’s Atlanta office. “Everything that was on pause before the pandemic is getting put back together.”

Billions of dollars in deals closing in year-end rush

Investors spent $11.2 billion to buy apartment properties in October 2020. That’s pretty good for a global pandemic—continuing at roughly the same level as August and September 2020 and only about 41 percent less than the volume of apartment deals in the same period in 2019, according to data firm Real Capital Analytics (RCA), based in New York City.
These transactions were a big improvement from earlier in the pandemic. In May, June and July, investors closed deals to buy apartment properties totaling just a few billion dollars per month, down 68 percent from the volume of transactions over the same period in 2019, according to RCA.
Many, many more deals are closing in the last months of 2020, according to dealmakers.
The fourth quarter is usually the busiest time of year for multifamily sales. “It’s reasonable to anticipate an increase in activity of 10 percent to 15 percent,” says Walker & Dunlop’s Mikkelsen. That increase will be more like 100 percent to 200 percent this year for Walker & Dunlop. “Our fourth quarter production will be multiples of the third quarter.”
By the time 2020 is over, real estate dealmakers Newmark expect to have closed sales of apartment properties that total just 15 percent less than 2019—despite all the chaos caused by the pandemic.
“There is a reasonable chance that this will be the biggest quarter we have had as a platform,” says Blake S. Okland, vice chairman and head of multifamily investment sales for Newmark, working in the firm’s Charlotte office.

Buyers pay as prices stay strong

These deals are getting done as buyers give up on their hopes of steep price reductions.
“Discounts have not been and are not in the offing,” says Jake Reiter, president of Verde Capital, a national private equity platform based in Conshohocken, Penn. Verde recently close three sales of properties totaling more than 1,000 apartments with capitalization rates averaging 4.5 percent.
“I am seeing sales activity in the class-A multifamily space and class-B+ value-add to be brisk, at least in our suburban portfolio, with cap rates at pre-COVID-19 levels,” says Reiter.
Cap rates fell to an average 5.2 percent for apartment properties in October as prices rose relative to the income produced by the properties. That actually down 30 basis points compared to 2019.
“We don’t see any upward pressure on cap rates,” says Brian McAuliffe, president of capital markets for CBRE, working in the firm’s Chicago office.
Many buyers hoped that apartment prices would drop and investment yields would rise in the economic downturn caused by the spread of the coronavirus. It hasn’t happened—especially not in institutional-investment-quality properties where the vast majority of residents continue to pay their rent on time, according to the Rent Payment Tracker, kept by the National Multifamily Housing Council.
“It took the market several months to really understand that the integrity of the rentals held up,” says Walker & Dunlop’s Mikkelsen.
The first investors to return to buying apartment properties were often smaller groups. “The early actors in the second quarter were almost all family offices and private syndicators,” says Newmark’s Okland. “These are groups that had been outmatched by institutions for a couple years.”
As the year came to a close, the floodgates seemed to open, including institutional investors and international investors. “Every investor type is making a push towards multifamily acquisitions going into 2021,” says CBRE’s McAuliffe.
So far, the majority of deals are getting done for properties where the performance is strongest. “The bulk of activity is concentrated in suburban and near urban settings,” says Mikkelsen.
Relatively few deals are getting done in overbuilt apartment markets—including many downtown areas—where developers have had to offer renters steep concessions to fill empty apartments. Property owners aren’t willing to sell at the prices implied by these bargain rents and are still holding out for better times, which they expect to come before too long.
“We don’t see much downside in valuations over the next year… even in the urban core. It is brutal, but it will get better,” says CBRE’s McAuliffe.
Source: “Multifamily Investors Are Ending 2020 on a Brisk Buying Clip“