COVID-19 has rocked the apartment transaction market, like almost every other part of the economy. But, at least by one measure, things are getting back to normal.
Travis Farese, CEO and founder of Offerd, says multifamily listing activity increased in August with 125 assets on the market. He culled various sources to develop his analysis. That is the largest number of new listings since 175 assets were listed in February—before COVID fully hit the US.
“While these are listed properties, not off-market, each is related,” Farese says. “Typically more listing activity is an indication of sellers’ willingness to sell on or off-market. This increase coincides with what we have seen off-market within our firm.”
Farese says Offerd has seen more receptiveness to a transacting off-market, which represents a significant portion of market activity in the sector. “We have seen activity increase, perhaps related to the pandemic,” he says.
Interest in off-market activity has come from several sources. Offerd recently announced a series of client partnerships with investors, ranging from large companies to smaller startups seeking to identify multifamily assets that meet precise criteria.
“We have a client that is a large institutional buyer and developer, and the strength of their balance sheet opens the door to the possibility of doing more institutional-sized transactions,” Farese says. “We do have some smaller clients that are typically focused on assets that would fit more into the mom-and-pop, syndicator-sized transaction. I think that everyone can certainly be opportunistic.”
In the pandemic, a lot of investors have been sitting on the sidelines. But Farese says that isn’t universal. He thinks the ones that are buying are more likely to go off-market.
“The more savvy operators have been in the business and are in it for the long haul,” he says. “They continue to be active, and they take a longer-term perspective. These older buyers can be a little bit more targeted, work on a more direct basis and don’t need a big, splashy marketing process.”
Farese says COVID has made it harder to tour properties and run extensive marketing campaigns. “For those reasons, the more direct transactions have been something that we’ve seen,” he says.”
Coming into the COVID, it was most definitely a sellers’ market in the apartment world. “Arguably, that market is become a bit more neutralized,” Farese says. “Sellers maybe feel a little bit less confident about their ability to inflate the asking price by running a broad marketing campaign to sell their assets.”
Farese also thinks sellers may prefer to go off-market because they don’t want any of their dispositions to be painted with the “distress brush.”
“Most of these sophisticated groups, which are institutional investors and private investors, have a horizon on when to exit their particular asset,” Farese says. “The pandemic or market dislocation does not really change that a whole lot.”
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