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Multi-family rentals virtually immune from coronavirus attack

Residential rentals could well be the focus of a “flight to safety” during a volatile economic environment
for rent sign waiting list
Photo: Dan Toulgoet

British Columbia’s multi-family rental apartment market should ride out the COVID-19 crisis better than most of a commercial real estate industry that is bracing for unprecedented disruptions over the next few weeks or months, analysts say.

They add that it is not only top-tier new purpose-built rentals but older assets that should see strong investment action and steady rental demand.

Mark Goodman, a Vancouver multi-family specialist and principal with Goodman Commercial Inc., said that the appetite for rental apartments from institutional investors, such as pension funds and real estate investment trusts (REIT), has ramped up in the face of the pandemic.

 “It is a flight to safety,” Goodman said, noting that volatility in the stock market –on March 13 the Toronto Stock Exchange posted its biggest one-day decline in 80 years – and threats to other real estate sectors has swivelled attention to “safer” residential rentals. Emergency-level low interest rates, he said, are also attracting investors.

Goodman said one Toronto-based REIT manager called on March 14 “asking for a list of all our listings and financial information as they are looking to move back into B.C. immediately and would like to expedite their investment strategy.”

Such investors, he said, are seeking prime assets, such as large new purpose-built rental properties in the $50 million range – a rare property in Metro Vancouver where the average apartment building is 54 years old.

In a March 20 webinar, Toronto-based Derek Lobo, a 30-year veteran of the apartment sector with SVN Rock Advisors, noted that, “Other than the drugstores, the grocery stores and Netflix, almost every industry is envious of apartment owners. Everybody needs some place to live and I think things are going to be better for our industry than most.”

Lebo added that existing Class-B apartment buildings, which represent the bulk of the market, should do well as people hunker down during this period of self-isolation. A sector that could be challenged, he said, is student housing because of the closure of universities and college campuses across Canada. Vacancies in Class C low-rent properties could climb, he added because of job losses in the service sector. In B.C, however, the provincial government and the City of Vancouver have pledged rental assistance to those most in need during the COVID-19 crisis.

“The apartment market will continue to deliver favorable performance,” summed up the Coronavirus outbreak: implications for real estate report released March 23 by Marcus & Millichap, a commercial real estate agency with offices across Canada.With vacancy rates near historic record-low levels across numerous markets, apartments will continue to deliver strong results.”