Ralph Godwin President & CFO YMP Real Estate Management, LLC
What was the biggest surprise during the pandemic? Multifamily was the enigma we did not expect. Adults stayed home to take care of children, were furloughed, or were working remotely. When the pandemic started, we were at an average occupancy of about 95% and suddenly our 95% occupancy was 100% occupied 24 hours a day, which meant our utility bills went up dramatically, especially water and electricity. Our maintenance people worked hard to keep up with work orders and maintenance given the high level of use that was going on in the buildings. The changes in our maintenance products and protocols increased costs by about 6%. We upgraded a lot of our cleaning supplies, housekeeping practices and added cleaning touch points throughout the day. It also took additional time to do what we needed to do in terms of disinfecting and upgrading the virus-proofing of our buildings. What changes have you made to your investing activities? Over the last five years, we’ve pretty much been priced out of multifamily acquisitions. Generally, the quantity of equity dollars chasing multifamily on a national basis, and specifically on a value-add basis, has been incredibly competitive and prices have been driven up to the point where owner-managers such as our company can’t figure out how to make money given the pricing that we’re seeing in the markets, and we are not willing to bet on rent increases that are two or three years away. We make investment decisions a little differently than some of our colleagues in that I can spend money today to create value in an asset where I might not see cash flow for 18 to 24 months, yet I have an immediate value that I can refinance. That’s literally what we’ve done with interest rates where they’ve been over the last two years; we’ve refinanced every asset we own. As interest rates start to increase, which it appears they will, and accelerate in that increase, I think CAP rates and overall pricing for multifamily will become more favorable and reasonable. 80
| Invest: Greater Fort Lauderdale 2021 | REAL ESTATE
Broward County’s office vacancy rate climbed to 16.1% in 1Q21, according to Cushman & Wakefield chairman and CEO of Hudson Capital Group, in an interview with Invest:. Office With COVID-19 sparking stay-at-home orders and companies shifting to remote working for employees, Colliers International reported a negative net absorption of -2.3 million square feet in Broward County office space for 2020 overall. The report also highlighted that subleased space became an attractive alternative to traditional office space during the uncertain times. The result is evident. The office vacancy rate climbed to 16.1% in 1Q21, according to a Cushman & Wakefield report. That compared to 14.7% in 4Q20. New leasing activity in 1Q21 totaled 272,082 square feet, above the 175,000 square feet in 4Q20. The Cypress Creek/Commercial Corridor submarket recorded the highest total for leasing activity in 1Q21 at 68,580 square feet. Broward County also saw a 9.0% Y/Y rise in overall asking rents to $36.30 per square foot. That is the highest rent level since 2017. CBRE said the steady increase in average asking rent rates since 2016 for both class-A and class-B office space is due to new deliveries and the quality of the space available rather than landlords asking for rate increases. Despite the uncertainty surrounding remote work and demand for office space for 2021, Broward County saw the highest delivery of new office space since 2001, with a total of 502,500 square feet. Moreover, the pipeline of office space under construction stands at 484,200 square feet. Three primary factors will determine how much of this pipeline ends up absorbed: how quickly the vaccine rollout can lead to herd immunity, the pace at which COVID-caused unemployment diminishes and tenant re-evaluation of their office space in both the short and long term. There is also the question of the lease terms themselves in the aftermath of the pandemic and
