Multifamily Outlook
Danny Court, Partner and Senior Economist with Elliott D. Pollack & Company
Danny Court is part of a group of economists focused on economic forecasting and how that plays into real estate. For multifamily, Elliot D. Pollack & Company is more involved with the planning and development part of things – scoping out sites, navigating regulatory or political issues, helping with zoning conflicts. They’ll get involved in government if necessary.
Data for Multifamily
(2:10) – Court’s team has found that the economy is recovering very well, which he attributes to vaccinations. There’s a lot of pent-up demand, and plenty of people who kept their jobs and built up income but didn’t have anywhere to spend it. Overall, there’s a great outlook for the next few years.
“We didn’t have a real recession,” explained Court. “There was a recession, we lost a lot of jobs, but this was not because of the economy, it was a government-induced shutdown for Covid-related pandemic reasons. The economy was in really good shape at the start of 2020 and had to forcibly shut down, and so again, we had those dynamics, no imbalances in the economy going into it, and now everybody just sort of waiting until they can fully recover and recover all those jobs. So there’s lots of pent-up demand, lots of money waiting to be deployed.”
(4:30) – So how do you know when the economy is in good shape? Objective data sources, and a wide variety of them, will help you get a good feel for what an accurate consensus is. In multifamily, real estate focuses on local markets.
(5:40) – Inflation is a concern right now. Short-term, we’re seeing the highest numbers to have come forth in a while. There is some hope that will subside, but Court says it’s an important indicator to keep an eye on, since it affects interest rates. Inflation matters for downside risk, even though all other indicators have been quite positive.
You can track inflation through the CPI or the Fed. The number is publicly available and published frequently.
“There’s an overall inflation that adds some more volatile products in there, and then sometimes they’ll strip that out and say, ‘Here’s base inflation’ and things like that.”
(7:45) – It’s also a good idea to keep an eye on jobs numbers. Right now, the unemployment rate is misleading. As long as jobs are growing, we should be good.
“When people stop looking for jobs, they’re removed from the unemployment rate,” said Court. “So you see a lot of jobs being created but then the unemployment rate stays the same. Why is that sticking up so high? It’s because more people are looking for work, so they’re added back into the unemployment rate.”
That’s tracked through a survey.
(10:15) – Some real estate sectors are in a flux. Brick and mortar retail and physical office space are the prime examples.
“The rule of thumb used to be 250 square feet per employee, private offices, things like that. Then it started trending down toward closer to 115 square feet per employee. That’s an open office concept,” said Court. “This pendulum has swung to, ‘Go ahead, if you’ve got an internet connection and we’ve got our database in the cloud and our files in the cloud, you can fully work at home.’ We’ve now come to understand that technology has caught up. A Zoom mee
