Canadian Apartment (Magazine?) posted last week an article about “rent slippage” among multifamily rental properties caused by the pandemic. The article was written by Barbara Carss of Canadian Property Management. The article can be read in full via the following link.
Most of the article reports on the findings of an index prepared by MSCI which tracks net operating income among various Canadian real estate sectors. The index showed a decline in NOI for 2021 and various industry participants are quoted in the article debating the meaning of that decline and what data and trends contributed to it, with no real conclusion.
But I’m not interested in that stuff since indices, though useful for stock markets, are in my opinion less useful for real estate, since price discovery in real estate is based on much, much fewer transactions and the almost complete lack of standardization between properties makes comparisons challenging (by which I mean virtually impossible).
What I found interesting was the following two quotes about multifamily rents:
What we did see for the first six months of Covid is that nobody moved. People stayed in place or those who moved were existing the rental market. So we saw vacancy growth and we came into  either in decline or, at best, holding. – Jaime McKenna, Fengate Asset Management
I was surprised when I saw the number [for declining NOI]. We haven’t been hit as tough as this with our own portfolio. I think part of it is the mix of suburban versus urban. Our urban assets got hit a lot more than the suburban assets. It was just stickier [in the suburbs] and we didn’t see the same declines. – Eric Plesman, HOOP
I also found interesting the following quote about shifting patterns in investment, by sector:
Close to three quarters of the transactions last year were in the multifamily and industrial space. Historically, it’s closer to 40 to 50 per cent. About 20 years ago, multifamily and industrial were about one-eighth of the private market index in Canada, so roughly 12 per cent. Today that portion is now one-third. That’s not a fluke. That’s a real change, both in investor preference and in value. – Paul Mouchakkaa, BentallGreenOak
What’s the takeaway here? The two quotes about multifamily rents show that the pandemic has hit different rental housing operators differently, some taking revenue hits and some not (or very little), which doesn’t surprise me since no two rental housing portfolios resemble each other much. The pandemic also apparently hit revenues differently depending on geography, favouring suburban locations, which also doesn’t surprise me since in the early days of the pandemic no one wanted to be sharing corridors or crowded elevators in an urban apartment tower. The quote about investment patterns reflects a long-term growing recognition among both retail and institutional investors that rental housing is a good investment.