Commercial Real Estate morning News Show
Leaders in the commercial real estate industry discuss the latest news and provide insights that you will get nowhere else!
Commercial Real Estate morning News Show
Commercial Real Estate Morning News Show - Multifamily Edition
On this week's show - a critical examination of the multifamily housing market amid the aftermath of the LA wildfires highlights the urgent need for community support and innovative solutions. Through expert insights, the episode elaborates on changing tenant priorities and market dynamics, presenting a vivid picture of the industry's response to disaster and its evolving future.
Other topics covered on the show:
• Insights from multifamily experts on housing crisis due to recent wildfires
• Discussion of coordinated relief efforts among apartment operators
• The impact of natural disasters on pricing strategies in multifamily housing
• Emerging trends in renter demands: top sought-after amenities
• Analysis of current occupancy trends and economic factors influencing market
• Future considerations for supply and demand dynamics in the housing market
We're live Woo, let's do this. All right, this is what you need in the morning. I already have my caffeine. It's the commercial real estate morning news show and we're exactly. We got our caffeine. We're going to talk some multifamily day and it's a girl's show. We might have some boys pop in, but you know what? Eh, who needs boys today?
Speaker 2:It's all good.
Speaker 1:We're going to talk through all sorts of stuff. So welcome to my guests. Oh, the boy showed up. The boy is here. Good morning. Exactly, it's our version of outnumbered. You know, the Fox show where it's all women and there's like one dude. And this is our version today, where he's outnumber there.
Speaker 3:It feels more like an intervention than anything else.
Speaker 1:Very cool, all right. Well, I'll have my guests introduce themselves and then we'll get started into the latest in multifamily news. So, shelly, go first, girlfriend Hi.
Speaker 2:Shelly Robinson. I am a podcast host on the multifamily media network called PropTech Pulse and I also have a consulting firm called PMX Partners where I do outcome-based engagements in multifamily and prop tech.
Speaker 1:Thanks for having me oh, sure, all right, and Sarah good morning.
Speaker 4:I'm Sarah Graham. I am an industry vet with 20 plus years of time spent in multifamily and CMO by trade, but now I am also a consultant, like Shelly, and I do fractional CMO work both for multifamily operators as well as prop tech startups.
Speaker 1:Very cool. Welcome, and Guillermo.
Speaker 3:Guillermo Salazar, CEO at RCX, 25 years doing centralization and maintenance in major industry and now kind of starting that way in multifamily, probably about a year, year and a half ago, Excited to have met everybody on the panel already once before or multiple times before, and also on a podcast for multifamily called Getting to Hell, yes, which is about selling, talking to sellers, talking to sellers, talking to sellers about selling man that was a mouthful.
Speaker 1:What the hell is this thing?
Speaker 3:Sellers. Talking to sellers about selling a multifamily, it's largely about the buyer's journey. Right, it's intentionally about the buyer's journey and what hell? Yes, looks like. Yeah, and Iris CX is a centralization software for maintenance.
Speaker 1:Yes, very cool, all right, awesome, and I know it's early feet. Are you in calgary? Are you? Is that?
Speaker 3:where you're in calgary I just had a. I was working late last night, so a little dusty yeah yeah, well, luckily it's a founder life right we always like yeah you know, board board meeting tomorrow, so always tuning in.
Speaker 1:Oh, yes, for sure All right. Well, well, let's, like you know, let's talk about the. Shelley and I were talking for the for the show, about probably the one of the most pertinent topics out there, so the LA wildfires, and there's obviously a lot of less housing available than there was before. A lot of it's burned down. So, shelley, why don't you go ahead and you just kind of talk about the resource that you found?
Speaker 2:I was. I was looking online and Jay Parsons actually reposted a podcast that True America was hosting where they were talking about an informal list that's going around of apartment owners and operators that are waiving deposits, application fees. Some have even turned off pricing software or doing manual pricing so that it's staying in the current market condition. So I thought that was really powerful that they're coming together. Camden also published what they're doing, so Jay Parsons the economist, he actually has that, and then the True America podcast also has information as well, so I thought that was a good thing to hear.
Speaker 1:That is very cool. I mean, yeah. So there was an article out talking about how the first response from the government was like LA, the city and county, and they were all like when people try to price gouge during this event, I mean they actually easily issued an ordinance that if they did it they were going to come after them.
Speaker 1:I can't imagine people would be doing that. You would think that would be such bad PR if you price gouge. But what we were talking about earlier is sometimes, when you're with these pricing algorithms right, when you're doing things like, say, for you know you have Airbnb or whatever it might be, it's going to naturally do that because of demand, right? Not understanding that the demand is really based off of a natural disaster. So, but you can. But you can turn that off. Is what, Shelly, what you were informing me about?
Speaker 2:Are you going to be also like? Airbnb VBAR BRO all of those short-term stays too.
Speaker 1:You can just go to manual pricing.
Speaker 2:It's really easy to do and keep it at, keep it at market level.
Speaker 1:Okay, all right. Yeah, very cool. That would be probably the best situation. But yeah, I remember buying. I bought one of my properties, my multifamily properties. I bought was right after Hurricane Harvey and no joke. What everybody felt like was like well, you're survived, so you'll be full like in two seconds, and when.
Speaker 1:I and it didn't. It didn't occur so, but that was partly because it was kind of a regional thing. But the insurance companies, they were more interested in filling up the hotels I mean that was like a temporary thing versus filling up the apartments, you know, and paying for that kind of thing. So it was, it was. It's an interesting times, for sure, interesting times, but yes, I feel for everybody in la, I mean, they haven't put the fires out yet no, not at all.
Speaker 2:More winds coming on monday? Yeah, I know, yeah, uh way back in the day, yeah, 2011.
Speaker 1:I was a part of the like big texas fire, the Lost Pines fires, where it burned 34,000 acres. My home was in the path in one of those. I lived out there and I can remember this was 2011.
Speaker 2:So they didn't have all the alert systems and they didn't have anything.
Speaker 1:All you got was a knock on the door going get the hell out. Like that's all you got. That's all the advance warning you got. Or if you happened to didn't, if you weren't home and you were trying to get back home the evening of, they just wouldn't let you get home so you had to go find some other place. You mean, like if your animals were there like you were just like basically stuck right and you couldn't get. It was. It was crazy. For sure, it was definitely an interesting time, but I can't imagine what's happening now with it.
Speaker 3:Is there a read on how many units were destroyed? I know that they sensationalized the celebrities' homes being destroyed, but there's more than just Anthony Hopkins lives in that. What's the number?
Speaker 1:Yeah, in the thousands, I think. The thousands, the number of, I think they said 95, 000 people are displaced.
Speaker 2:I heard this morning which is is a huge number. Yeah, yeah, for sure. Yeah, I can't get it, we were already in a housing shortage.
Speaker 2:You can't absorb that you can't absorb 9 000 people all of a sudden needing a house right there's people coming up to stay with people in the bay area where I live and if you're trying to bring supplies down, they're telling you to to gun it down and go back home. Like, don't try to stay down there, so that I'm with a group that are working on bringing you know supplies and I guess water is even needed. So people are just driving water down it's.
Speaker 1:Oh yeah it is. Yeah, that is crazy. Kind of reminds me of Katrina and all the refugees from Katrina in New Orleans. I mean it's interesting for sure. Well, I'm glad the apartment industry is doing the right thing and they're helping and they're doing that.
Speaker 3:Yeah, I just Isn't it fascinating that? I don't mean to create a villain here, but isn't it fascinating the actuarial prediction to this event by pulling all those policies, like I just like? I mean analytics is pretty obviously something that I've been involved with my whole life, but like the actuarial prediction about the event and the correction to their exposure, it's a bit, I mean, it's very I don't even know how to say it Like it's, like I get. I marvel at the math of it all.
Speaker 1:What are you talking about, Will? What are you talking about?
Speaker 3:Well, like a bunch of insurance companies like State Farm and et cetera, they pulled a of policies, uh, basically a month before the fires oh, they did yeah I don't know, I don't have like again a bit of it sensational in terms of my news source, but as the news sources, but reading into it, a lot of insurance companies and we talked about this on january 2nd amy are already pulling out of the hot regions and a number of them had canceled policies specifically prior to the la fires, without anything before the fires even started, right, but just as a course of businesses closing out year-end, they just basically canceled policy, saying we think this is a high-risk region, we're out. Wow, sure, interesting. I don't think that's dissimilar from other regions of the country.
Speaker 4:I don't think that's dissimilar from other regions of the country. The time is terrible and it's not to minimize the tragedy that's happening in California, but I think you know there are certain parts of the country where you can't get flood insurance, which sounds very similar to me. You know they say there are so many floods in this area and a lot of insurance companies are doing similar things. You know other natural disasters but similar sort of veins of actions in other parts of the country. So, but the timing is really interesting. You know, maybe it was just a year-end thing, like you said, guillermo, but I mean, I don't mean they didn't.
Speaker 3:There's it's. I would say it's impossible for them to be correlated, but the interesting thing that the Monday morning quarterback will take a look at is that if insurance companies aren't going to underrate certain parts of the US, what does that mean to rebuild? You have a flood in a certain area and if insurers won't underwrite homes that are rebuilt in that flood, then that is not available real estate to rebuild, correct, and so I, you know you talk about the how to connect all the dots the housing crisis, the cost to create the housing and then the cost to operate housing and then insuring it. Like it becomes a divide by zero in some cases, which doesn't solve the problem.
Speaker 4:No no.
Speaker 3:Right.
Speaker 4:You're talking about affordability and supply, and I mean all of that you're right, yeah, yeah, and I you know, uh, it's, it's.
Speaker 1:It highlights a couple of things, right, so there was a, there was an article out, um, about how this one house survived. I saw that, right, and they had done the things that he had cleared the brush, he had put on concrete site, he did hardy siding, he did metal roofs, he did all these things. You know, tempered glass on the outside, he built with building materials that if there was a fire, it would give it increase the chances of survival. And it did. It's, yeah, fire it would give it increase the chances of survival.
Speaker 1:And it did, it survived. So I you know which I you know. I guess that you know it should just become. If you're going to be in a hot zone, you should just build. But if they're going to make it building code, they probably should make it building code right. It just tend to reduce, reduces it. I will say I went back way, way back in the day when I was doing multifamily. We had chose to put hardy siding on the outside of one of our. We had taken off the existing siding and put hardy siding. It was more expensive but no joke, somebody left a candle burning.
Speaker 1:Stupid tenants, I don't know why they do this, but they left a candle burning inside the house caused a fire, but because we had put hardy siding on it, it was enclosed in that one unit. We died but it didn't spread to any other unit, so it was actually. It actually saved people because we put hardy siding on on the outside of that, where that unit was right can you? Imagine, and so it's. It's amazing what building materials can do, but yeah, it does. It's like it reminds me.
Speaker 2:I was in that. Really so sorry, hurricane andrew. I went through that in florida and then they changed the code to concrete, so it uh, you know, I think this will be interesting to watch and then also interesting to watch the economics of it as that starts to change and they work to rebuild certain areas.
Speaker 3:It's going to be a yeah conversation well, I mean yeah and what are they going to build right, like, like, uh, the I don't know the mix of density? And, of course, all the news we see is about, you know, big mansions being burned down because it's sensational. But like, what's the mix going to be? You know, like Malibu is like where mansions were right Richest zip in the US, or one of the richest zips in the US, and so like, is that the plan? Like, I don't know it's gonna be. I, actually I'm gonna be. It'll be interesting to watch the decisions that are made, because there's so many inputs and stakeholders into how these decisions we made. That almost makes me feel uncomfortable at the negotiation that's gonna have to happen, because nobody's gonna be happy with the outcome. Oh and then, by the way, there's a summer games in four years.
Speaker 1:I know no, no, no In three years.
Speaker 2:Three years, yeah, which is really interesting yeah.
Speaker 3:Sorry, I was preparing an article on just open construction jobs and there's a bit of a dip on open construction jobs in December just because things are stabilizing a little bit, but there's still like there's still 300,000 open construction jobs in the US right now.
Speaker 1:Right, oh yeah.
Speaker 3:That haven't been filled. So like this is a significant amount of like density, population, all that stuff, like even materials, like where are you going? To get the stuff, to buy this stuff. So it's one of the answers.
Speaker 1:Yeah, no, I know it's all of the above right, you get supply chain issues. You get all of that. I mean, if you've had apartments that have gone through hurricanes, like I have, I mean it does you get this regional supply chain problem where you can't get certain things and it just delays your construction projects and it like doubles and triples the cost, and it's just. You know, talk about price gouging, wish that was around when somebody was like you know, I was trying to rebuild my apartment complex, somebody come in and go, hey, stop charging three times for materials. You know, but no one's crazy town, but it is what it is. It comes in. It comes in, but we, I'm praying for everybody, I'm hoping anybody who's in harm's way is safe and, um, you know, pets, everybody, hopefully, hopefully, people, um, that'll minimize the damage, not like in the Maui fires where a hundred people died, which is crazy. That's just horribly awful. But talking about I will move on to the next topic, talking about building things and how we're going to rebuild things.
Speaker 1:Gray Star came out with the five amenities renters can't live without. You ready for these? This was just an article out two days ago, so it's like and I don't know if they're well, they'll have to build it this way. But people? The number one amenity was walk-in closets. People want walk-in closets. The second one was large windows and abundant light. And the third one was like air, fresh air ventilation. Who came up with this? Like, how do they know about fresh air ventilation? I guess from COVID. Cupboard parking was number two, or garage facilities was number four. I mean number four. And then high efficiency appliances is the fifth amenity sought by renters. Those are the top five.
Speaker 3:So walk-in closets ample, so vanity is prioritized.
Speaker 1:Exactly. I mean just like all of that surprised me. Like have I been out of the multifamily game that long that I did not know that walk in closets worth a thing?
Speaker 4:I have to say, amy, I just was walking a property with a client a couple of weeks ago and that was one of the things we were walking together with the community manager, and the community manager stopped and pointed out in the tour we were walking vacants and she said this particular floor plan style has so much closet space. And so we started talking about closets and she said for people who are either downsizing or they're in an apartment home temporarily while they're waiting for something else to be built, or you know, they're doing a remodel in a home or whatever, she said closet space is one of the biggest things they hear from their prospects. So I read the list this morning. I pulled it up on the side once I got your list of things you're going to be talking about and I said I'm honestly not surprised by that.
Speaker 2:It's not a sexy thing, it's not, you know, it's not the grand countertops and the you know fancy fitness centers and it's kind of boring.
Speaker 4:But when you think about it, you know if you walk into an apartment and there's nothing else in there, the first thing you think about is where's my stuff going to go? For sure, right, I mean I, I think it's a. I was not super surprised when I saw it. I don't know what everybody else thinks, but I um I kind of was sitting there going yeah, that's in line with what I've seen and heard and what my clients have sort of pointed out to me too.
Speaker 3:um, so kind of timely interesting if you're, if you're to rank those in terms of upgrades I mean, it seems to me the appliances is the easiest thing to do.
Speaker 1:Yes.
Speaker 3:Parking is there or not there? Pressure ventilation sounds weird.
Speaker 1:I mean you can do covered parking. A lot of people do it, but it used to be the thing back in the 80s and 90s everybody had covered parking. You could buy those vintage stuff again. But yeah, no, I got to keep going.
Speaker 3:Yeah, I mean walking closets. Is that something you can like? You can practically reno retro.
Speaker 4:No not easily. I mean a lot of, particularly if you're, you know, mid rise or if you've got any sense of scale. It's all stacked, so you have to be knocking down walls and potentially absorbing units, which no developer operator wants to do.
Speaker 1:So I think the closets are the closets in many cases yeah, exactly, I mean you could make the bedroom smaller and, you know, put in and add an additional wall to get a walk-in closet, but now you got no room to put your bed yeah, like it's funny, I look at the five and you know those are.
Speaker 3:All I mean is it is.
Speaker 1:It is a bit of a poll of the obvious that people like new stuff it's all in there is new I mean because you can't change the window sizes or you can maybe add windows to the exterior, but it's, but it's super expensive to add Windows into a unit. That's not. That's okay for new developments, but if you're trying to retrofit anything, add bigger windows is not easy to do.
Speaker 3:Yeah, what's the incremental rent you're going to get?
Speaker 1:Yeah, exactly For sure. Yeah, Fresh air ventilation. That one just shocked me, like I was like, first of all. I have never heard a tenant ask me do you have fresh air ventilation? I mean, like, is that it has to be a COVID thing?
Speaker 2:It has to be, I think, urban, like where I live in California. I have all of these heap of filters throughout my house because we have fires every year and so you're constantly trying to clear the air, urban environments, air quality. I think Graystar has a heavily urban portfolio, so I think that part didn't surprise me with that. But I don't know. I'm like trying to think of anywhere that actually has that like really as an amenity that I've seen advertised.
Speaker 1:Yeah, yeah, that one, that was that. Yeah, that's super weird. Okay, all right. Well, gray star, that was cute, that was a good story.
Speaker 2:I was going to add that some, some properties are retrofitting the covered parking with solar on top of it, which I thought was really innovative. Even the schools out here in California are doing that. I think that's smart, and then utility costs have gone up so much. So the energy efficiency conversation, I think, is here to stay conversation.
Speaker 1:I think it's here to stay. Yeah, yeah for sure, and I yeah. So the high efficiency appliances is the tennis way of saying I don't want to pay as much on my electric bill.
Speaker 3:Right, basically, I want a new appliance, all right, yeah, it could be.
Speaker 1:It could be that too. It could be that too. But honestly, if they knew better, they would be like how old's my HVAC unit in my, in my, uh, in my unit? Because that's taking about 40% of their energy bill.
Speaker 3:Exactly, it's not the dishwasher dryer dishwasher it's not that.
Speaker 1:Yeah, it's how much. Yeah, how old is that sucker? Because that would be it for sure. No, that's crazy, that's too funny.
Speaker 1:All right, so good news, good news, sure no, that's crazy. Tell that's too funny. All right, so good news, good news. There was a uh article out talking about how, um, the occupancy in uh, in multi-family and most of the markets, went up. An amazing thing so, and this was before the fires, but it improved in most of the markets. So the largest 50 metros saw occupancy increase by 30 basis points to 100 basis points, which is good. It went down a little bit for a while.
Speaker 1:I think it's just. Don't you think it's just a natural reaction from the prices adjusting, because you know, I'm in Austin, texas, and we were crazy town. Our rents went, I don't know why, don't ask. Everything went crazy here during COVID and it was like up to like 80%. The rents were just horrible and it finally met its cap. Now it's having to come down. It dropped down by like I don't know 30%, 40% in pricing Came down. So do we think that the odd can see like the prices are now actually matching demand, or are we thinking there's the we? You know, people can, I don't know. What do we think is happening? And other than people can't buy a house?
Speaker 2:I always look at Carl Whitaker and Jay Parsons insights for this and I think it's really about a slowdown of the starts and the completions and the supply and the demand all starting to stabilize finally, especially in some of these tougher markets like Phoenix and Las. Supply and the demand all starting to stabilize finally, especially in some of these tougher markets like Phoenix and Las Vegas and Dallas way oversupplied for a while. So I think that's starting to kind of stabilize as well as the good news. But I think this remains to be seen too as the economic factors of jobs and job creation. I still know a lot of people that are unemployed in my network and job creation I still know a lot of people that are unemployed in my network and still looking. So that one, I think, remains to be seen this year. That's my two cents, yeah.
Speaker 4:I would agree with all of that. The other thing I think, too, that's helping us is that interest rates for mortgages are still quite high, which drives more people obviously to look at renting as a long-term viable option. I think if you're a homeowner and you were refinancing in 2020, 2021, you've got a really good rate. But if you're out shopping for a mortgage right now, it's nowhere near what it was just a few years ago. The rates are still two to three X easily. So I think there's that points in our favor for multifamily certainly. But I agree with Shelly, there are a lot of pieces that are still kind of in flux. That will be interesting to see over the coming months as the new administration steps into the White House and whatever else comes along with that Job market, all the things remains to be seen.
Speaker 1:Yeah, I mean, normally the markets don't like wild cards, they don't like, you know, uncertainty and they don't like any of that. But he's like the biggest wild card of them all and they seem to be okay with it right now. I mean most of the I don't. I don't get it, but maybe it's, maybe it's just the Elon Musk factor, maybe you think Elon is going to come in and save the day. I don't know.
Speaker 1:We're going to get a super efficient government in four years. This is going to be great, so note the sarcasm. Great, so note the sarcasm.
Speaker 4:But JENNY.
Speaker 1:GUY MADSENIER Funny.
Speaker 3:ERIC HOCHBERGER JR. Anyway, like Shelly said, I lean on Parsons for this sort of stuff and he had a post-history recently talking about it is regional, it is economic-oriented and it is regulatory-oriented. So if there was a lot of approval of supply, we're not out of the woods yet. But there are green boots that are happening in certain markets that have a high employment, which is, it's like Captain, obvious right. There's nothing really to learn from that.
Speaker 1:Yeah, no. So I just does that trend hold? Do you? You think do we have higher occupancies going into 2025? The supply is not going to be able to catch up, Right? It hasn't had supply issues for a while, and then we start a little bit, and because we did that because of, you know, labor shortages and supply chain issues, and then nobody could get, no developments were doing happening because the interest rates were so high, I didn't pencil. Nothing made sense. So does that bear like 10 years of great occupancies for multifamily? Is that? I mean, what is he?
Speaker 3:saying Well, I mean my what's a bigger, I'll say presidential agenda, housing, affordability what gets you more votes, housing affordability or occupancy?
Speaker 1:I don't know, I don't think he's even talking about it. Honestly, truly, I, you know, I don't want that what the hell is he talking about? He's talking about buying greenland from the country be talking about?
Speaker 3:he's talking about buying greenland from the country. I think ultimately like inflation and housing affordability and, you know, being able to kind of like live your life is going to become something that is a pretty important topic, and yeah, the the housing affordability piece to me rings as a as a larger population, a lot.
Speaker 3:There's more voters that care about housing affordability than occupancy, and so I think that there's a bit of a policy headwind that will emerge that's going to keep things stable, like it's not going to make it so that you know owners are going to be writing checks, but it's not going to be the halcyon days of, like, the early 2020s. I just feel like the policy to make housing affordable. The millennial generation is like 30 to 35 right now, right, and there's like a million of them looking for a home right now and they're going to be looking for something like. It's like something like 8,000 a day are looking for a new home, a new place to live, a new place to live. A thousand a day are looking for a new home, a new place to live, a new place to live.
Speaker 3:I'll say home seeking Right and their affordability to what they can get. It just isn't, doesn't exist anymore. They're looking to have families. They're growing. This is the largest generation since the Bay Boomers, so they're going to command a lot of attention for what they can afford and I just I'm not pessimistic about it. I'm kind of optimistic about it that the multifamily will respond, but we're going to have a different solution out there and the the economics of it half pencil for sure. So I'm curious to see what what might emerge from a policy perspective, because it's gotta be easier to build stuff. It's really hard right now. It's kind of we've got to build stuff faster and cheaper with less people. I don't know how we're going to solve that.
Speaker 1:Robots.
Speaker 3:Robots Sure, we're going to digitally print 30 story buildings and again like these are one of those things that it's fun to have a conversation with beers with, because there's no right answer. Yeah, yeah, yeah. I do think that the policy of making it affordable to live at home might overpower occupancy, but it's going to have to happen in regional markets, so it's going to be. It'll play itself out like through the invisible hand.
Speaker 1:But a lot of affordability really is just a supply, it's, it's, it becomes a. If you increase the supply, things become more affordable. Is generally takes a long time.
Speaker 3:You can't 24, 24, 30 months right.
Speaker 1:Yeah, you can't force it, but you do have to do. You have to do on the supply side. That's how you fix this. You fix the problem by just increasing supply and if the you know, I don't know legislature, the code and enforcement, people can get their acts together and approve these building permits a little bit faster and and you know, you know, grease the wheels a little bit, I mean, I think you can increase the supply. That way, you can't control. You can't control construction time. That's the one thing you can't do. Right, it's going to be what it is. I mean, you can do things modularly, you can put in robots, you can do whatever you want to do to build something faster, but the permanent time, you know, if we're going to do AI, let's do that and plan review, like if we're going to do anything like because that's pretty simple, like you're just like applying codes to a set of blueprints.
Speaker 1:Why can't AI solve that problem Right and then prove all those things? I think that would be that would be super beneficial for the whole world.
Speaker 3:So yeah, so so to to to kind of ask if all things were static and we weren't bringing on supply. I think that it's obviously going to. It would. It would emerge because there's more, there's no home seekers and there are supply out there. But I do think that we're going to be bringing on a lot of supply, like half a million multi-family units coming on in 2025 well, that's normal, that's par for the course 1.7 new homes will be built, 500,000.
Speaker 3:So it'll be, it's going to be an interesting, it's going to play itself out. Occupancy will be. I think think the riddle, as you articulated, is like there's 30 months lead time on an occupancy number in a market for a new building. So you got kind of like a bit of buffer to figure out how you're going to. You know how you're going to compete on a marketing basis to be able to fill those units on resident experience or retain the residents. You've got Like it's kind of like what's the problem you're trying to solve at the, at the, at the individual owner and operator level, like building by building, they've got to solve the problem their own way. And then, market by market, they've got to solve the housing affordability problem. Maybe that's a different way of looking at it.
Speaker 2:Yeah, right there there's a gentleman named Andre Nacrin who's here in the Bay Area that has artificial intelligence application that takes all of the land that's available for affordable housing, layers all of the ground by like 50% and then reducing hours and costs by like a crazy number. I think he said it reduces the hours of work by like 3000. It's, it's incredible what he's doing to really work on the affordable housing. Um, go live date. That's awesome. Yeah, he was a guest on my podcast.
Speaker 1:He's doing really cool things yeah, I mean because because hud basically owns the and freddie mac kind of own the affordable uh, from the financing side kind of own that right. So um and so it's. So it's a little. If you're going to apply ai to something, affordable housing is a great one because it's pretty structured. You've got either fly tech or whatever it might be, and you've got to follow these certain processes right. So you've got the process pretty much laid out. There's fewer, fewer variables than a normal market rate development.
Speaker 1:So yeah, that's cool, that is super cool.
Speaker 3:It is interesting, shelley, what you described, I remember, years ago as Netflix was kind of ramping up. This was pre-COVID. Netflix was ramping up their production. Netflix is using AI to build out their production projects for years now and it all goes down to how they're going to deploy it, how they're going to release it, but a big part of it is where they're going to film it. The capital inputs, the operational inputs, the available labor, the tax credits, all of that gets thrown into a big, huge black box and they choose, they choose site locations based on all those inputs. So it it, it it's. It's like a, not an. It seems like a pretty normal port of that kind of like inputs into something that solves a different problem for multifamily.
Speaker 4:Yeah, interesting. One of the things that I've been thinking about too with all of this is the shift towards back to office and how all of the return to office mandates a lot of the big companies. I'm sure we've all seen the announcements on LinkedIn and you know whatever in the headlines. All of these big companies are saying you know, we're back in five days and it's a you know a 180 of where we were literally five years ago, when everyone was like, stay home and don't leave your home, and I mean it's truly five years, which is kind of wild to think about. But we've, we've gone from. You know, everyone was in office all the time. That was sort of typical and normal to everyone is now home forever.
Speaker 4:I mean, some companies said we're remote forever, and now they're sort of coming back on that. But I can't help but think how many people moved during the time of COVID to places that were more affordable. And now, how does that sort of sea change? You know, are people sort of quietly quitting to say I don't want to go back and I like living, you know, in a different place that maybe is more affordable. Or are people saying, well, I have to go back, and you know where I live now doesn't allow for me to do that, and so there's this sort of population shift. So I've been watching that with great interest and how it intersects with what we do, you know, family and as operators, to try to think about how does that, how do we ride that through and see where we all end up. So it's I don't have any answers for it, but it's a trend that sort of overlays everything we've been talking about, and I think it's a really interesting thing to be watching.
Speaker 1:For sure, and then tie that to the build a rent market, right? So Avalon Bay wants to put a billion dollars into the build a rent market, but build a rents are not in the urban core, they're suburban, suburban majority, because they have to have enough land in order to go do them. So they were. They were really riding that hybrid work environment, all of that other stuff, and so you could go do a build to rent like 30 miles out from a major metropolitan area, and that was the game plan and that's what they did. So now everybody has to come back to the work.
Speaker 1:Does that change the build to rent market? Do you have to get closer into the urban core, because that's where everybody's located? I don't know, but yeah for sure. I mean, I think, build a rent, I think a lot of people are just relying on these Gen Z's and millennials as they grow up. They don't want to maybe be an apartment, but they would like to be in a house, but they don't want to own the house because that's a whole other. You know, I think it's this hybrid thing. I don't know, but the build and rent market would be pretty interesting to see what happens there.
Speaker 3:Or the BTR side. I mean, just to your point, sarah, like it's interesting to watch non-conventional markets like Boise explode right. South Dakota, Salt Lake City, I mean these are just blew up during COVID and Boise is still rocking right now. Alabama is rocking right now, like it's it's really crazy to see that kind of that, that those markets grow. And so you take a look at BTR and then so there's that right.
Speaker 3:So it's kind of the data on that side, btr side, they're having challenges like, okay, the, to your point, like I want to target Gen Zs, but there's no schools in these btrs. So now you're kind of like you're building a btr community because you available real estate, available, you know, uh, geography, but then you're not, you don't have any of the conventional amenities that that generation is looking for. So it's like it's a bit of a. It's kind of a bit of a compromise, you know it. It's. It's a. It's a camel right Horse designed by committee. Yeah, but it's solving a problem. It's solving a problem for, you know, operators that had to. They had to lower their operational metrics to be able to be get their cap rates where it needed to be.
Speaker 1:For sure. Right, it's. Typically you get bigger margins in a VTR community, the tenants stay longer. But to your point, yeah, I mean it's not a traditional subdivision where they might put an elementary school in that subdivision. Right, it's different, it's just a btr thing, so they have to. Um, you would think that the developers are talking with the school districts like, hey, we're going to bring on 100 housing units here, um, you know those kinds of things. But yes, but they don't have the elementary school inside of it, not like the red regular home subdivisions do right, the subdivision might take like 15 years to develop right, to develop out btr.
Speaker 3:You're like, boom, there's all. Exactly, yeah, it's there and it's like a colony and all of a sudden you know just the conventional. So we need to see how that plays out. Because, like, I can see it being totally like very appealing in Sunbelt Because you're kind of like living on a resort, right, yeah, you put a golf course on it, you put a really nice community center, you put some other amenities, you've got delivery for grocery et cetera. And you put some other amenities, you've got delivery for grocery, et cetera, but you work from home because you're doing whatever. But like for day-to-day stuff like soccer fields, baseball fields, like how does that fit in to the BTR equation?
Speaker 2:Yeah, Most of my clients, if they're in the BTR space, are definitely targeting good school districts. If they've got the BTR space, are definitely targeting good school districts. If they've got the larger units, if it's a combo of BTR that's like townhome condos mixed with some single family homes, they're still. They're still desiring good school districts or the future of a good school district and all of the amenities and conveniences around it. They tend to pick suburban markets that are already growing. You know some of them are even buying sites that were targeted for sale and because what Sarah said with mortgage environment, they've sold it and it's going to be BTR instead.
Speaker 2:So I think there's strategies, really intelligent strategies, at play with kind of long-term growth. But I think what we're all saying too with this back-to-work environment is is it sustainable? A lot of people I know personally are moving out because they want the quality of life for their families and then they're super commuting in and waiting for self-driving cars to make bets super commute easier for them. So I think it's going to be fascinating to watch as all this technology plays out and uh enhancements in technology and trust and safety and those kinds of technology.
Speaker 3:Yeah, like btr is a needed innovation from a financial perspective yeah, so it does it's a, it's a great move to solve the housing affordability problem and and availability problem. So I, you know, and it you think about it in terms of, like, the scattered site solution for SFR is also a financial innovation for home, you know, for home residency, right to live in a home, and so it's. You know, these people are very intelligent people that are running these, that are in charge charge of these companies, and so they're thinking about these things day and night and, um, you know, it's, it's a, it's, it's a, it's a novel innovation. Uh, municipalities, suburban, they need to think about how that affects their business and ultimately, yeah, where are people going to live?
Speaker 2:that's a, that's a big question mark to me, if I was an employer, I would want these like suburban centers to open up that were like flex office space where you could have multiple. Like in Silicon Valley, you could have multiple tech companies all in these flex spaces, so people didn't have to commute so far. They want them in the office.
Speaker 3:To me, there's an opportunity there to make it more flexible and have options, but what's crazy is this suburban office is like 3x urban office, like right now you're competing with yoga studios and chiropractors and dentists etc. And it's like 45 bucks a square foot. And you go look at downtown office they're paying you to take it and it it's crazy. So it's it's, it's just a mismatch. So there's a mismatch right now and someone's going to solve it.
Speaker 4:Yeah, I think too there's this push pull of everyone should be in the office to collaborate.
Speaker 4:And I agree with you, shelly, I think the idea of a satellite office where you know, if you've got a strong concentration of employees and they're making it up, you know, 80 miles away from your corporate office, type of thing, then sure, set up a satellite for them.
Speaker 4:But the whole argument that you know we keep seeing over and over again in the news is that the executive teams of these companies are saying, well, we need to be back together for collaboration, and so if you don't have the critical mass to get together for collaboration sake in a satellite space, are you really, you know, is that solving the problem? And I don't know how much of it is truly collaboration versus hi, we have this 10 year lease and nobody's in the building and you know what are the numbers we're really talking about, um, but it's, it's an interesting uh set of metrics to think about, to say, okay, what, what makes return to office successful? And is it people in seats in the, the corporate office that you know someone has leased downtown, or is it truly the collaboration in which case the satellite office solves for that beautifully, you know the dean's collaboration, or it's like it's.
Speaker 3:I don't know what people are doing right collaboration is a much friendlier word to use because, like I want everyone to be together, but actually it's really I don't know what the hell you're doing and I need it's risk management yeah, it's risk management from the fact that you've got people, when they work remote, can work three jobs and get paid three times a salary to do one, you know, and the same time a day.
Speaker 1:I mean they could be, um, you know, I, I don't know, I mean that's, that was the thing with people were saying is like, yeah, I have three jobs because I work for this company and I work all remote, so I get paid, and there can be conflict of interest there. I think it's risk management from that tense. But but I also think that, especially if you're working in like a lot of the in the office side, office side, a lot of the people that are driving that are AI companies. They're driving people getting into an office, partly because they're trying to protect their IP, partly because they're trying to make sure that whoever whatever is accessing their systems. If you have to do it over a VPN, that just slows everything down and the connectivity is really bad. So if you're remote and you have to use a VPN because you're trying to protect your IP, you're just not going to get anything done. It just slows. It's just so damn slow and so it's interesting.
Speaker 1:It's interesting to see what's happening there for sure. So I think they might have to go in an office which everybody is going to and I've seen those, so I host the office have to go in an office which everybody's going to and you know I've seen it. So I host the office show on Mondays and you should see what people are having to do to get people to come back to the office. It's like they have to have like amenities there, like they have to have all these different things for them. It's like you know, back class A multifamily, you got to have a top golf station in our office so people will actually show up and not work, but it's actually not that bad. But the Google slide. They have to have all these different things for people to actually go there, otherwise walking into an office nobody's going to want to go.
Speaker 3:It does go back to and this is I'm sure it'll be controversial, but it's coming out of my go yeah, it does go back to like. I mean and this is like I'm sure it'd be controversial, but it's coming out of my mouth, so it's halfway there already but like it comes back to like. I really believe it comes back to like like old white dudes managing they used to where they want, really wanting to manage the way they used to manage, which is like walking around and seeing people in offices working late or working early or whatever, and that was like that was the inputs equaled out. Inputs was representative of outputs. Yeah, but we're just not in a world right now like that.
Speaker 3:Like with everything else, it's outputs drive the the equation, but we don't know how to measure outputs from a neck, from an employee productivity perspective, at the person level, and so, like, we're kind of like. I feel like and again, I love the office it drives me crazy that we can't be in one spot together, because that's the way I like to communicate with people. I like to pop in, I like to hijack people at the water cool, I love that stuff. I'm like a gold medalist at that kind of management love that stuff. I'm like a gold medalist at that kind of management, but it doesn't work.
Speaker 3:It doesn't work with people that I need to hire right I know it's true, I've had to change my way because, like I don't have a choice. I get those cards are not in my hand. No, if I, you know, if you're, if you're a, a fan company, etc. You can sway those, you can make those decisions and you can influence that outcome.
Speaker 3:And I really believe that there's there's a probability that they're making people come back to the office because they don't really have a culture of output based performance and that's like a different conversation with hr pros that are way better at this stuff than I have. I've already told you, managing people is my biggest weakness, so, like I'm not good at it, but because that's because I rely on my personality and and and like talking to people to get the job done, and and there's a whole generation of people that were raised that way, like that were like man they're, they're in their roles because they're able to get people to do superhuman stuff. That's way easier to do when you're in a room and you're like pumping people up than it is over a all, like no one stands up and claps in a call Like it's awkward.
Speaker 1:No for sure. But if you, if you, if, if the return to office mandates do happen and people do, I think that it'd be so weird. I just think it's so weird. It'd feel icky to me.
Speaker 3:I've been remote for many minutes. Again, to the same as the. I look at the Twitter thing, which is a huge one. I think it's just a way to give people a reason to leave. This is what we're going to do. A certain percentage are going to leave. There's going to be some exceptions of the genius that knows the Coca-Cola recipe. They're not going to leave, and there's gonna be some exceptions of the genius that knows the Coca-Cola recipe. They're not going to get fired but, like everyone else is, they're just going to like.
Speaker 3:It's like cutting out that bottom third of like. Think of how much hiring was done over between 2020 and 2023. Right, and a lot of it was just like. Kind of like a race for people, a land grab of people, and they're looking around, going who's doing what? I don't know, and so let's make something really uncomfortable and awkward. People are going to self-select. It's going to cost us less than firing people or doing a layoff Looks, unfortunately, a little bit better than news, and then we'll kind of like we'll be a little bit easier on it.
Speaker 1:Yeah.
Speaker 3:I realize it sounds very Machiavellian, but it's just kind of like I think there's more behind it than just getting people in the office to collaborate. It's like maybe I'm a what do you call it?
Speaker 1:You're a conspiracy theorist yeah. It's probably all of them, people do funny things for funny reasons.
Speaker 1:They do do funny. We're on the last, I don't know nine minutes of the show. Y'all we're here. Okay, last story what the F is up with the DOJ and the FTC going back again after this rent thing? They dropped it last time. Now they're doing it again and they're going after Graystar. And I'm just like who got a heart on for these multifamily people who are apparently evil Like I don't? Has anybody seen this story again? I'm like, oh my Lord, this is a crazy Graystar for hidden fees and then somebody else going after. Like it's not a fun time to be at Real Page.
Speaker 3:I mean making Landlord the the villain was in the bible like this is like so convenient for a politician. Really, landlords and tax collectors have like been villains for about 2 000 years, so it's like it's kind of a convenient story it's too funny.
Speaker 1:Has anybody heard about the latest one? I like I don't understand this. I don't understand why this is happening.
Speaker 4:I don't know I had read um. The story about gray star uh, but it at that point it was a few days ago is titled breaking news and you know we'll add more to the story, kind of thing. Dot, dot dot dot.
Speaker 4:So it seems to me just skimming the surface, but I can say that I know I'm not affiliated with Graystar, but I think all multifamily operators are hyper-aware of junk fees and transparency and the importance of making sure that those things are clearly spelled out. To say it out loud, I think a huge issue for every operator in our space is the fact that a property management software platform, which hypothetically would be the repository for putting all these junk fees in Platforms, aren't built for that and every operator out there calls, there's different codes for things and some companies use three and some management companies use a making up numbers 53. And there's no place for those things to be entered in our PMSs. And so, in terms of translating the fees and actually getting them into public domain, to say, yes, here are the fees and here is your all in price, there's no way for us to do that as operators and it's really causing a snarl.
Speaker 4:And I was optimistic with NAA and NMHC and all the legislative work that they had done and have been doing, to say, hey, you know, multifamily doesn't quite fit into the box of junk fees and here are all the reasons why. And then, you know, the story came out that Grey Star was under a microscope and I said, oh, not again. So it seems to be. You know, maybe to Guillermo's point, it's landlords are just on the list to be. Maybe, to Guillermo's point, landlords are just on the list to be blackmarked forever. But I think as an industry we're really grappling with how to solve for this and there's no easy answer because every operator looks at this so differently in terms of again labeling what the fees are.
Speaker 1:Yeah, I mean. So a lot of them are like actions based on the tenants, right. So if there's a whatever, I mean, I remember when I used to write my leases and it would be like, okay, this is your rent, this is what we're going to charge you for trash, this is what we're going to charge you for this, this is what we're going to charge you for that, right, and this is like the normal things, right, those are the normal things. But then there's some fees on like hey, if you break a window, you got to pay your first 75 bucks of that. Or if you do something, there's like you have to pay, and so those aren't as clear, right, but they're in the lease, it's all in the lease.
Speaker 1:I wonder if it's just a communication thing.
Speaker 1:It's not really a junk fee per se, because they sign those leases and you know, naa writes that stuff is almost airtight Like they're ironclad, looking by lawyers and they say you are aware that there's this fee and like, you signed it like a hundred times, you knowing that there's this fee.
Speaker 1:So like I'm just, I don't understand why there's all this, this junk fee, when I'm like, but they signed the lease, like they, they understand, you know. But, yes, does anybody remember that lease? No, they sign it, they get in their apartment and then it's just how everything kind of rolls. But and it really is dependent upon, I think what happens is each property manager staff is the enforcer of that lease, and some people enforce it and some people don't, and some people are consistent with it and some people aren't right. And so if we could take away that where we understand every fee that would be associated with that lease, and then that becomes standard, maybe to where, oh, there's some sort of action, we have a lease violation here and it's somehow I don't know. I don't know, but I think it's interesting to me I'm not a conspiracy theorist at all.
Speaker 3:Here's another connection. Here's another one. How much of this is related to the political win that happened when the realtors got spanked? Oh really it was a huge win politically. Commissions are unfair. They're vague. There sounds a lot the same. They're vague, mysterious. What am I being charged for? They own the marketplace, like it's like, and there was a massive political win for that. Yeah, backpedaling ever since then yeah, it looks and walks like a lot like the same yeah, where people are.
Speaker 1:People are mysteriously being charged for stuff that they don't know that they're being charged for.
Speaker 3:They have no opportunity to negotiate out of it right.
Speaker 1:Yeah, yeah.
Speaker 3:The junk fee stuff. There is work that can be done to make it better and maybe that needs to push it forward. Transparency, for sure. We're seeing that in airlines, hotels, everything. Transparency could solve a lot of problems and, of course, the tools to be able to do that. I've met a thousand owners and I don't think that any of them have an evil intent in their body. They're just trying to make sure they're being fair capitalists. And uh and I just again there's there's the nar uh lawsuit. That happened a little year ago, does it?
Speaker 3:feel like a year ago, yeah right, with a huge political win, and someone got spanked and this is kind of like feels a lot like the same to me in and someone got spanked and this is kind of like feels a lot like the same to me. No, I mean, I don't want to pour that on the shot.
Speaker 1:Well, who knows, who knows? Yeah, I mean it was the. It was definitely the year for the consumer, for sure. Um, yeah, I mean it's stuff, that's definitely it all right y'all, I don't want you to forget.
Speaker 3:we cannot forget the acquisition of PropertyMail and Mezzo this week.
Speaker 1:They win.
Speaker 3:PropertyMail acquired Mezzo this week. That's good for everybody.
Speaker 1:Okay, explain that one to me.
Speaker 3:PropertyMail, a multi-main software right. Yes, acquired Mezzo an AI, I'll say AI agent company.
Speaker 2:Yeah.
Speaker 3:So we talked about in January. This is the agent. I think it's outstanding. Yeah, see conviction around AI and the resident experience. That haven't happened in transaction. Congratulations both the Ray and Mike from from property, melvin and Mezzo for coming together. It is outstanding for the industry and prop tech to have transactions that that validate you know what we're trying to do in the world, because all the things we're talking about that can get better with AI and they see that in the industry. When I saw the news that came across it's funny I had chats actually going with my cannery over the holidays trying to connect with them and stuff, and then all of a sudden this comes out and I'm like, oh, that's why you guys are busy. I'm just real. These transactions in our space add conviction to the people that are trying to solve the problems with new solutions. So it's outstanding. So I just want to I don't want to lose that because it's still news jacking something that happened a few days ago.
Speaker 1:Yeah, that's true, that's true. No, that's awesome. Yeah, I think it is the year of the AI agent and people can figure out or how they can apply AI agents to their space. Is is pretty cool. Yeah, for sure. I mean, we're working on it too, if it's still the max, so wait until our agents come out. It's going to be awesome.
Speaker 1:So, yeah, yeah, well awesome all right, we're here, so this is the time where people you can tell people how to get a hold of you if they want to get a hold of you. So, so we'll start with Shelly.
Speaker 2:LinkedIn's the easiest. So, shelly Robinson at LinkedIn and PMX Partners, thank you for having me.
Speaker 1:Yeah, thanks for coming on, and Sarah.
Speaker 4:LinkedIn at Sarah Scarborough, graham and I'm at sixdotsconsultingcom.
Speaker 1:All right, very cool, and Guillermo.
Speaker 3:Guillermo Salazar IRCX. Let's use LinkedIn as well. It's a great spot to connect.
Speaker 1:It is. It is All right. Well, thanks for coming on the show. Y'all Thanks, and we will see y'all next week. Next week. Thank you for having us Take care, we'll have you Thanks.
