The MDU Update - November 2023

PJ Duffy
Co-founder and Head of Growth, Hum
Nov 1, 2023
4 min read

The MDU Update is a monthly round up of what's going on in the world of multifamily real estate with a focus on what matters to broadband service providers.

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🍂 Happy November! This week is the annual OPTECH Conference in Las Vegas. If you haven't been, it's one of the two largest annual events for the Multifamily industry (the other being the NAA's Apartmentalize). The event is focused on multifamily operations + technology (get it?) and is attended by some of the most prominent property owners and managers in addition to scores of vendors in an expo hall – including many national ISPs. Most years, vendors use the industry's annual pilgrimage to announce new products, features, and partnerships while property owners use it as intentional time to learn about new solutions and opportunities.

Here is a primer on what is expected out of the event this year.

We'll do a special edition MDU Update in a few weeks to recap OPTECH.

Reading time: 4 minutes

Story #1: Wave of Multifamily Loan Maturities Imminent

Quote: "The strikingly low sales activity and sizeable bid-ask gap for multifamily investment properties in 2023 has been driven by higher interest rates that have lowered investors’ returns at current prices, but lower property income growth, higher expenses, and stricter lending terms raise the potential for acute distress and contribute to a more favorable pricing environment for buyers."

Why it matters: The effects of higher interest rates are sharply felt across multifamily at the moment. With insurance costs simultaneously climbing steeply around the country, property owners are earning less and looking for additional net operating income (NOI). But if a downturn leads to a price correction in multifamily, many properties will change hands and new ownership will likely be interested in building upgrades (like technology investments).

More on Economic Woes: ‘Circuit Breaker’ Tripped on Multifamily Construction Financing

Story #2: NewPoint Launches Build-to-Rent Financing Program

Quote: "The single-family build-to-rent (BTR) sector continues to gain momentum, with 104,000 units expected to be completed by the first quarter of 2026, according to data from RealPage."

Why it matters: With various factors contributing to lower home ownership rates among young families, BTR developments are one of the fastest growing segments in the multifamily housing industry. With centralized property management, these communities operate just like vertical apartment buildings but they're laid out like a horizontal neighborhood. Developers of these properties seek exclusive marketing and bulk agreements just like other MDUs. However, with more square footage and the potential to offer managed services like home security, these households will look more like SFUs from an ARPU perspective.

Further Reading: News about BTR or "Single Family Rental" property developments can be found here.

Story #3: White House Launches Effort To Spur Office-To-Residential Conversions

Quote: "Roughly 15% of the office space in the 105 largest cities in the country is eligible for conversion, according to a National Bureau of Economic Research report. Cities like New York, D.C., San Francisco and Boston have started focusing on revitalizing their business districts through these conversions."

Why it matters: It's no secret that 1. housing stock in the US is still woefully undersupplied and 2. office real estate has been getting hammered since COVID-19 spurred the hybrid work movement. Converting massive buildings in prime locations has it's fair share of challenges. Making sure the conversion of a building's connectivity infrastructure is not one of those challenges could prove to be extremely lucrative in the next few years.

Further Reading: CBRE Analysis Highlights Office Conversion Momentum

📚 What else we read last month:

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