Knock Talk: Episode 21 – Multifamily Trends and Data with ALN’s Jordan Brooks

 

What does summer have in store for rents, occupancy, concessions, and more?

Jordan Brooks, senior market analyst with ALN Apartment Data, shares the stories behind the data and the trends in our latest episode of Knock Talk, hosted by Knock’s Lucas Bourgeois.

Episode Highlights 

Why is data so important for apartment managers?

 

How should multifamily operators make sense of all the data out there? 

 

The latest multifamily occupancy trends, according to ALN data. 

 

Full Transcript 

Lucas: Hey everybody, and welcome to the Knock Talk, where we shed light on all things multifamily proptech and data. In this episode, we’re super excited to talk to Jordan Brooks, multifamily data analyst at ALN. Welcome, Jordan! 

Jordan: Thank you so much Lucas. I’m really excited to be here. 

Lucas: We are excited to talk with you today. And, obviously, you’re an expert in data. But before we really dive into that, I’d love for you to explain to our viewers a little bit about ALN and what you do for the organization. 

Jordan: Sure. So, ALN is a multifamily market research company. We’ve been in business since the early nineties. We’re in our 30th year right now, actually. Initially, the company was just an apartment locator. After some time, we transitioned into what we are now, which is basically we offer platforms to any player in the multifamily industry — whether you’re on the management side, whether you’re on the supplier side, brokers, assessors, kind of anyone in between. We work with government agencies and apartment associations. So, we focus only on multifamily. But, we think the advantage there is having the focus on one vertical helps us a lot with our research. 

And then, in terms of me, specifically, I’ve been here a little over seven years. I’ve been in my current position on the data team for about four years. And, basically, my role here is to integrate public data sets with our own, come up with models and visualizations and reports that help our clients and help us internally. And in addition to that, I speak at conferences and apartment associations and write monthly articles for real estate magazines. 

Lucas: All of the above. Well, I will say I’m a big fan of ALN Data. I use it on the daily with my role as a supplier, so it makes my job a lot easier. Very much appreciative of your platform. 

Jordan: That’s our goal, I’m glad to hear that.

Lucas: Well yes, you save me a lot of time. Obviously multifamily is ALN’s kind of niche, so why do you think data is so important for property managers?

Jordan: Well, I mean, it just fills in the gap so well with things you don’t know. You’ve got your own operations, kind of your own internal data, what’s going on in your units, on your property and your portfolio, things like that. But it’s just so valuable to know not only what your competitors are doing or what others are doing in your market, but just to be able to contextualize what you’re seeing onsite versus what your submarket’s doing, what your market’s doing. And that can kind of shed some light on if you need to make tweaks operationally or not; maybe you’re just part of a more macro trend at the moment in your geography, things like that, so really just putting information behind decision making, I think, is the most important aspect.

Lucas: Well, thank you for that. And I think one thing out there that most folks in this industry would agree is there’s data everywhere. There’s not a shortage of data. There’s so much data out there, you kind of have to take it all with a grain of salt. And you have the public data, the private data, the proptech data, the systems data. How do you make sense of all that data and what would be some recommendations or best practices for our viewers?

Jordan: I think regardless of industry, everyone’s kind of drowning in data, right? And one of the hardest parts is just figuring out how to winnow that ocean of data down into something that’s useful for your use case. I would just say some kind of top-level recommendations: One would be just to make sure you know the nuts and bolts of how the data was compiled that you’re bringing in. So, for example, if you’re working with Census Bureau information and you’re bringing that in addition to your own internal data, you want to make sure that the geographies are the same. Some of the data is seasonally adjusted, maybe others isn’t, that kind of thing, where you’re really making sure you’re doing an apples-to-apples, ending your math right, if you will, working with the data. And then also just more broadly, I think, just instead of collecting as much data as possible in every direction, really having a focused idea of what is it we’re trying to measure? What is it that we’re trying to track? What are the KPIs that matter for our use case? And then from there you can determine what data you need to go source and how to work with it.

Lucas: I love that, working backwards, right? What do you measure with KPIs that are most important to your organization? Because, as we know, they can change from owner-operator to fee-managed to organization by organization. I like that tip there. So ALN, obviously, you have a ton of data in multifamily; let’s talk some trends. What are you seeing right now for multifamily on a national level for trends?

Jordan: Well I think the biggest story is just, from an apartment demand perspective, especially, we released our recovery starting in about the third quarter of last year. And now, with the first quarter of 2021 in the books, we’ve now had three straight quarters where apartment demand was stronger than in that quarter the previous year. So that’s a really encouraging thing to see coming out of the trough of last summer with everything that was going on with the pandemic and everything else associated with that. Rent growth was a little bit lagging. We saw the demand bounce back first in the second half of last year. Rent growth didn’t really reemerge until the new year. And in the last four months, really January through April, these completed months that we have for the new year, things have really been pretty encouraging at the national level. I mean, apartment demand has continued to explode. New supply was very active; we’ve got about 130,000 new units delivered in just these four months, which is a massive number. And the demand was there to meet those. We didn’t lose average occupancy in the face of that new supply. And then, as I said, the demand trend continued into the new year, and now what we’re seeing as the result of that is finally some rent growth coming back, and that’s what we were missing last year, obviously. So nationally, as I said, a pretty encouraging bounce back.

Lucas: That’s very exciting. We’re seeing that across many markets. But there are certain markets that have been hit hard with the pandemic. What would you say are some of the areas that are really struggling from what has happened from the pandemic?

Jordan: Well, generally, I think it’s important to keep in mind when we talk about these national numbers that if you go just one level below you’re going to see, in some sense, a different story. So last year, really it was the primary markets that really took it on the chin. The secondary and the tertiary markets, that wasn’t really the case. They saw some positive rent growth last year, apartment demand went stronger in those smaller than in the primary markets. And in fact, demand was stronger than in the previous year in those same markets. So the pain really was concentrated in the largest markets last year, for the most part. And then getting a little bit more granular than that, there are a couple of profiles of markets that we really saw have a hard time. One would be the small, kind of tertiary, markets that are heavily skewed toward either energy jobs or tourism jobs. So those are the small markets in Texas and across the Gulf region. And then think Honolulu and some of the smaller areas in Hawaii and things like that. But also the big sort of dense, expensive coastal markets had an especially hard time. So there we’re talking about New York, Boston, the Bay Area in California, Los Angeles, and then — not a coastal market — but you can throw Chicago in there as well. And what I would say there is we saw not so much — well, really we saw occupancy losses and rent losses, and some of that had to do with concessions, which I’m sure we’ll talk about. But I would say the encouraging thing in the first four months of 2021 related to those markets that really struggled last year is that the rebound that we’ve seen has not excluded those markets. Those markets have done better this year, as well, whether that’s demand, whether that’s rent growth, so that’s been a good sign.

Lucas: That’s great. We want to see all these markets bounce back. You had mentioned concessions. And we know a lot of our listeners and our viewers out there are offering concessions at their properties and for their organizations, so what are you seeing for some trends in concessions?  

Jordan: The concession lever definitely was pulled last year by operators, that’s for sure. And we really look at two separate features of lease concessions: We look at the availability, and then we also look at the average value. We saw big increases in both last year, which you would expect. And then what we’ve seen in the last four to six months, as we’ve seen some rent growth start to reemerge, a big piece of that has been that lease concessions have decreased, in particular, in terms of the availability. Last year we got up to around 20 percent of conventional properties nationally offering a lease discount; that’s back down to 17 or 18, so a little bit of a drop now, and then also the average value, not quite as much of a drop, but it has started to come down. And again, this is also more of a problem just in the largest markets, really. As I said, the secondary and tertiary markets, as groups, did relatively well in a COVID year last year. And part of that, as well, was that we didn’t see the huge rush to lease concessions, smaller markets, that we did in the big markets.

Lucas: We hope to see those can go further and further for our multifamily partners. But one thing — so you’re getting all this data, and obviously we’re on an upward trajectory. What are you seeing, or is there anything that surprised you over the last couple of months with what’s coming in for data?

Jordan: You know, I was a little bit surprised, to be honest with you, at how robust the demand has been so quickly. I mean, the numbers we’re seeing are fantastic, and like I said, even the markets that have struggled, especially last year, San Francisco, as an example: Through April of this year, apartment demand in the Bay Area is significantly higher than it was in the first four months of not last year, but 2019. Last year, of course, we were already starting to feel a little bit of the COVID effect in April numbers. But if you go back to 2019, pre-pandemic, the numbers this year are better. And that’s in a market that was really kind of a poster child for struggles last year. And so again, I think the common theme is encouraging developments. And like I said, the surprise was probably just how much the demand did snap back.

Lucas: The bounce back, yeah. And we want it to continue going that direction. And guess what’s upon us: the summer peak leasing season. So we’re hoping that that’s the best ever. What are some trends that you’re anticipating for this peak season this summer?

Jordan: It’s interesting, last year, what set the whole annual number back last year for net rent growth or anything like that was the second quarter. And traditionally for our industry, it’s the second and third quarters that are the strongest, right? So that’s kind of what kneecapped the industry last year, was a typically strong quarter of the year was completely taken off the board. And so this year, with everything that we’ve seen in terms of even a strong fourth quarter in 2020, which is typically a softer time of the year, everything we’ve seen the last couple of quarters, the first quarter of this year, all the way through April, I don’t really see much reason to think that trajectory would end in the summer or would change in the summer. As I said, we’re seeing some of the large coastal markets start to kind of improve now. They’ve still been lagging in rent growth; we saw the demand bounce back last year, but not rent growth nationally. And then this year we’ve had the rent growth. These markets like the Bay Area in California and New York, they’re just a little bit slower. So the demand has come back now and now we’re starting to see rent growth trickle in. So I would anticipate this summer those type of markets being able to really establish some rent growth, maybe bringing the concessions down further. I looked this morning and still think about 36 percent or so of conventional properties in the Bay Area are offering a lease concession, which is, you know, double the national average. So I think as we move through the summer — and that is a traditionally strong time of the year for us — we should hopefully be able to see some further reversion back to “normalcy” in the industry, which, for multifamily, “normalcy” in the last handful of years has been quite good.

Lucas: We’ve had some good times. My fingers cross for all that, we continue to see those concessions go down and the seasons go up with leases and occupancy. We always ask our viewers, we always ask everyone that pops on Knock Talk, is questions. So one thing that I want to ask you is what are you most excited about or what are you most excited about for the future of multifamily and the multifamily industry?

Jordan: Well you know, honestly, it’s just, there are so many things, right? I mean, our industry, we all work in an industry that, at the end of the day, it puts people in homes, right? That in and of itself is exciting. And then also we’re really starting to see, finally, this technological bloom in our industry that’s been a little bit behind some other industries in incorporating some data practices; some new technology; Internet of things; proptech, as you guys talk about. So that’s a really exciting thing. And then also just, you know, coming out of the pandemic last year and seeing these strong results that we’re seeing, that is also just by itself exciting, as we should be in for a pretty nice recovery here as we move into the second and third quarters.

Lucas: Well I really appreciate all your feedback, and I know our viewers are going to find this very beneficial. I just wanted to thank you on behalf of Knock, Jordan, for hopping on and giving us some insight on ALN Data and the trends that are trending in the multifamily industry.

Jordan: You’re welcome, it’s just a pleasure to be here. Thank you so much.

Lucas: Alright, well we appreciate it.

 

 

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