At the 2023 CBJ Real Estate Symposium held at the Hotel at Kirkwood March 30, a panel of real estate professionals gave a glimpse into the current state of the industry, trends in the multifamily living space, where they see the industry headed and what keeps them up at night. The panel followed a keynote […]
At the 2023 CBJ Real Estate Symposium held at the Hotel at Kirkwood March 30, a panel of real estate professionals gave a glimpse into the current state of the industry, trends in the multifamily living space, where they see the industry headed and what keeps them up at night.The panel followed a keynote from David Barker, a partner in Barker Companies and a member of the Iowa Board of Regents.The panel consisted of Tiffany Earl Williams, a real estate broker with Skogman Commercial; Dave Johnson, a business unit director with Shive-Hattery; and Brandon Pratt, owner of Lion Development Group. Eastern Iowa Airport director Marty Lenss spoke on the panel virtually.In lightly edited format, these are their responses.
Q: What trends are you seeing in the multifamily living sector?
Mr. Johnson: Technology is now expected. It’s no longer a perk we can offer. It’s expected we have smart thermostats, virtual tours and more. The other thing we’re seeing is people are moving into these apartment complexes for the community. They want the amenities, but they really want to do activities with others.In tertiary markets, we’re seeing more and more of our partners move into small communities where there’s a high demand for multifamily living. Vacancy rates are still really good but slowly rising. Rent growth is expected to slow over the next few months. Supply is rising faster than demand. In terms of retirees, I think we're starting to see retirement facilities have to make changes to address the changing demographics of their clients. For baby boomers, moving into a conventional retirement home is the last thing they want to do. So we’re seeing retirement facilities more suitable for the active user where they unbundle their services. We’re starting to see retirement centers have less staff payroll and more third-party providers.
Give us an update about what’s happening at the Eastern Iowa Airport.
Mr. Lenss: We’re in a fantastic position for the future. We are one of the few airports that are debt free. It certainly helps us be competitive in the region. As far as things going on, we just approved a budget a couple months ago that is north of $100 million for the first time in the history of the airport. The terminal project had no property tax from the county. We’re also looking at more parking needs. Passenger numbers are up about 16% year-to-date, so we are anxious to see the March numbers as well.
How’s the economy doing from your perspective? How do recessions typically impact the multifamily sector?
Mr. Johnson: Historically, the number of multifamily living units produced in a viable market follows and lags behind job growth. As job growth declines, the multifamily market declines. Premium units usually lag six months behind that job growth. During the recession of 2008 we saw a 60% decline in multifamily housing sources. That hit really hard. Overall right now, the vacancy rates are quite low. There is still demand out there. I think we’re going to see a tick down in developers wanting to get into projects. I’m looking at the number of unit starts to decrease over the next two or three years.
How has the increase in interest rates impacted your business and clients?
Ms. Williams: It has required us to be more creative and use less leverage. It impacts a number of projects. Where I think it definitely gets more challenging is projects that would have required more leverage.Mr. Pratt: Trickle-down economics is definitely a real thing. As interest rates continue to go up…it’s passed along to us. You’re going to see some of the smaller restaurants not be able to increase prices fast enough to offset debt or the costs. We’ve been very blessed to have a great run in the restaurant industry seeing double-digit returns. One of two things is going to happen. Either you’re going to stop seeing new restaurants or what has been happening will continue – everyone in the audience will pay more for food.
What is the Corridor missing?
Mr. Lenss: One thing we can do is work much more collaboratively as a region and as a much broader region than just the Iowa City/Cedar Rapids typical conversation we have. If we want the betterment of Eastern Iowa, we’re going to have to think differently than what we’re doing today.Ms. Williams: We’re progressing toward filling the gaps, but the public-private partnership climate is a challenge. Step one is trying to figure out how to attract and retain the right people. I do think…regionally we could have more cohesion.
What keeps you up at night?
Pratt: Everybody says you don’t have to worry about things you can’t control, but I think the thing that keeps me up the most is how hard it is to keep control. I’m optimistic we’re going to see inflation come down, but (the Federal Reserve) has been wrong the last 18 months, so I don’t get a lot of comfort from them. Williams: Supply chains have been a challenge. It’s a serious challenge to inflation…which has seriously impacted our industry. However, I feel there is a movement toward manufacturing in the U.S. and fixing supply chains problems to not rely on overseas. That will also be something to mitigate the cost of materials over time. It’s a timing game in my mind. At a certain point, we’re going to have more supplies available and the supply chain should fix itself.
