Presented By: Partner Insights
Industry Spotlight: Q&A With Morgan Properties’ Jason Morgan
Morgan Properties is a national real estate investment and management company with 300 apartment communities and over 75,000 units across 15 states. Morgan Properties is currently the fifth-largest apartment owner in the country and its multifamily portfolio is valued at over $11 Billion. Commercial Observer’s Partner Insights team sat down with Jason Morgan, Principal at Morgan Properties to discuss the current D.C. market.
Commercial Observer Partner Insights: What market activity have you seen since March? Are any deals coming through the pipeline?
Jason Morgan: During the beginning stages of the pandemic, many sellers took a wait-and-see approach to better understand the pandemic’s impact on collections and asset values. This led to acquisition opportunities being harder to come by and declines in transaction volumes. That being said, the economy is slowly starting to re-stabilize, causing an uptick in deal activity. Interest rates are at a historical low and they are predicted to stay low for the next 24 months. Moreover, a pro-inflation Fed and continued institutional appetite for Class B multifamily should result in cap rate compression in the sector.
Do you see any new avenues for opportunity? Which asset classes should the industry be investing in?
Morgan: There is strong indication that investors will turn their attention to suburban, Class B multifamily. Before the pandemic, there was a significant focus on urban living and new construction. Today, we are seeing a nationwide trend toward de-urbanization and de-densification, which spells good news for suburban multifamily. This trend was starting pre-COVID – the average age of millennials is 30, and, while that segment of the population is getting married later in life and prefers cities to suburbs, they were already moving out of the cities as they started families of their own and prioritizing schools and space. This shift has been significantly bolstered and accelerated by the pandemic.
Additionally, as major companies such as Facebook transition their employees to permanent work-from-home, renters will have more interest in apartments where they can have a dedicated office separate from their living space. This a major benefit of Class B housing, which typically offers larger units with more spacious floorplans and privacy at an affordable price. Gone are the days of developers maximizing apartments per occupied square foot and building micro-units.
I anticipate that investor desire for Class B multifamily will increase given its continued recession resiliency, ability to be acquired at a significant discount-to-replacement cost, and better demand dynamics than its Class A peers.
What are your biggest takeaways or words of advice for experts looking to come out on top in a tumultuous year?
Morgan: When compared with other major economic downturns, the pandemic has been unique in the way it has affected not only the United States, but the entire world. The challenges COVID-19 has placed on how we live and how we conduct business will have long-term effects on the multifamily sector.
One of the most important lessons learned is the need to be resilient. Uncertainty always plays a role in our industry and the key is to think differently, be tenacious, and continue to be opportunistic. Owners and managers who focus on growing markets and providing the best amenities and service at an affordable price will find success for years to come.
While some owners and operators will adapt and flourish, others will diminish. Leaders who are willing to meet the new demands and act quickly to provide their residents with the best service in today’s environment will assure their own viability. Don’t be afraid to pivot and think differently.
Morgan: As we reflect on the past few months and adapt to the new ways we conduct business and live our daily lives, it is important to remember that it is essential to have an entire team that can rise to the challenge with flexibility, courage and a caring heart. When you have a committed and dedicated team that is willing to work all hours of the day and weekends, it really puts into perspective the value of your team. Our differentiator at Morgan Properties is our employees and our track record. It is what sets us apart and allows us to continue to grow and flourish as an organization. We will emerge from this crisis stronger than we entered it.
Join Jason Morgan and other CRE professionals at the 4th Annual Financing Commercial Real Estate Forum | Washington, D.C on November 17, 2020. Click here for more information.