Zeitgeist - Sign of the Times
A Return to Normalcy at Apartment Communities
Last month, as the U.S. made substantial progress towards herd immunity via vaccination, the Center for Disease Control (CDC) rescinded mask and social distancing mandates permitting states to relax their own rules and allowing many businesses to return to “normal”. For apartment owners, it remains to be seen what the new, post-Covid-19 normal will look like. Will residents return to work at their offices alleviating the stress on parking, wireless internet, trash collections and water and electricity usage? Will the more tenant-friendly states repeal their lingering eviction moratoriums, rent caps and no late fee regulations? Can we bring back the clubhouse coffee machine and recommence resident events? Below are some of our predictions, based on our portfolio of 40+ apartment properties across the west.
Back to Work – Residents will return (and have already started returning) to the office but not at the same level as before, especially tech workers at higher-end communities. Landlords should expect utility and operational expenses to fall while budgeting in the long run for expenses that are higher than pre-pandemic levels. High-quality internet and Amazon package management will continue to be important. Owners will need to accept that some apartments will double as home offices indefinitely and adapt appropriately.
Landlord Regulations – The CDC’s nationwide eviction moratorium is scheduled to expire on June 30th. Most of the larger, more populous states adopted additional regulations controlling evictions, rent increases, late fees and landlord collection techniques. The more landlord-friendly states have already rescinded many of these regulations and business is getting back to normal. The more tenant-friendly states (Washington, Oregon, California, etc.) have continued to extend these regulations. Assuming Covid-19 case numbers continue to plummet, these states will likely rescind their regulations later this year and landlords will see a return to pre-pandemic normalcy by 2022.
Amenities / Resident Events – Amenities are wide open in Arizona and have been for several months. In Washington and Oregon, pools and gyms are just starting to open but at limited capacity. Policies around in-person tours (vs. virtual tours), resident events and mask wearing vary property to property depending on local regulations and the risk tolerance of owners and property managers. Although the goalpost around these regulations seems to be ever changing, most municipalities are moving towards allowing apartment residents to enjoy their property’s amenities. At Pathfinder, we expect to be fully open, at all properties, this year.
A Return to the Cities
The Covid-19 pandemic forced Americans to reevaluate a multitude of elements ranging from estate planning and retirement saving to hand-washing techniques and cooking abilities (or lack thereof). Perhaps the most drastic reevaluation involved people deciding where they wanted to live, with many renters moving away from cities to the suburbs.
Prior to the pandemic, a large portion renters (mostly young, educated professionals) favored high-cost, urban areas due to shorter commute times, walkability to restaurants, bars and entertainment venues and the ability to live amongst and mingle with liked-minded folks. The pandemic brought about stay-at-home orders – with work-from-home mitigating concerns about commute times. These orders also closed restaurants and entertainment venues causing many who had migrated away from urban markets toward the suburbs for apartment communities with larger units with patios/balconies, yards and more common area open space.
This trend gained momentum throughout the pandemic depressing occupancy and rental rates at urban apartment communities while benefitting suburban, garden-style properties. As urban centers return to life and social distancing requirements fade, we expect many renters to return to cities. According to a recent report from researchers at Columbia University and NYU, urban demand will return in 2022 and rents will eventually snap back to pre-pandemic levels. That said, some portion of workers will never return to the office and continue to work from the suburbs indefinitely, one of many lasting legacies of the Covid-19 pandemic.
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