by Paul Willis

With a consistently inconsistent economy and various additional headwinds, the multifamily industry is in something of an evolving state. But amid the uncertainty, executives still must have a plan.

Some of the industry’s top CEOs recently discussed their immediate priorities and future ambitions at the Multifamily Executive Conference session Inside the C-Suite: Strategy, Scale and the Next Wave of New Deals. The executives imparted ways they are navigating operational shifts, market risks, growth strategies and overall uncertainty at the Newport Beach, Calif., event.

Overcoming persistent hurdles
“Our regulatory and political landscape, specifically with the multifamily environment, has truly been affected by rent control provisions,” said Andrew Kadish, CEO and chief investment officer of CAPREIT, citing recent examples in Minnesota and Maryland. “And it’s not simply the legislation that is passed initially, but rather it is the threat of more onerous regulations that might come into the fold. And I think it’s that fear of the unknown that is really hampering investment enthusiasm.”

While many investors will remain on the sidelines until conditions stabilize, Kadish noted that the multifamily sector is more resilient than most. That’s why CAPREIT continues to acquire properties and remains active through the current cycle. The company recently assumed third-party management responsibilities of a 3,000-affordable-home portfolio in the Mid-Atlantic Region. The large nonprofit owner of the portfolio previously ran it as a charity rather than as a business.

“We think that the introduction of an entrepreneurial property management company, such as CAPREIT, can really offer a bespoke solution for these nonprofit owners,” Kadish said. “It can really drive rents, but also provide a service-oriented approach for these residents. These 3,000 units really have not appreciated the true installation of a professional property management company.”

Properly deploying tech and AI
From a technology standpoint, operators are becoming savvier about deploying tech-based resources for company-specific objectives. For instance, TruAmerica Multifamily is an acquisition/rehab model that renovates 5,000 to 6,000 homes a year and needed a better way to track all facets of the process.

“We’ve been able to use a platform of algorithms and formulas to model how we’re doing as it relates to rents and absorption and get that information faster so we can speed up or slow down the pace of renovation and be more efficient,” said Bob Hart, president and CEO of TruAmerica Multifamily. “So, it’s made our business more efficient, more accurate and timelier in setting rent levels, and monitoring the amount of renovation supply.”

The company also invested in its own proptech group in recent years to assist acquisitions and asset management teams on a real-time basis.

AI, naturally, remains a constant source of introspection for executives, who must strike the balance of adding it to increase efficiencies—but not to an overwhelming degree.

“I’m sure that all of us are getting 475,000 emails per day, telling you how AI can basically manage your life and brush your teeth better,” Kadish said. “We approach it in that we want to have a more simplistic tech stack and really have a targeted focus on AI to improve the efficiency of our employees. We don’t have a Terminator II approach. We don’t think Cyberdyne is coming to take us over or that robots are taking over the world. Rather we see AI as something that we can leverage data and that we can improve our employee effectiveness.”

Decreasing supply will help reset landscape
Despite some of the headwinds affecting multifamily, operators expressed reasons for optimism in the resilient sector.

“What keeps us optimistic is the underlying supply landscape,” said Angela Kleiman, president and CEO of Essex Property Trust, which owns and operates properties along the West Coast. “While there are broader conversations as to whether it’s regional or national, from the West Coast perspective, we’re adding probably half a percent of total stock supply to total stock, which means supply this year compared to the next year will be 20% lower.”

That’s a meaningful number, Kleiman said, considering stock is already low.

“It means that in our market, we have lower risk as far as whether it’s pricing power or if you look forward to potential rent growth and other acceleration to our markets,” she said. “It gives us a good base for our optimism.”

Overall, the executives maintained a bright outlook for the immediate future of multifamily while acknowledging a handful of regulatory and economic challenges. Enough positive signs exist, they agreed, to believe the sector will remain a solid investment moving forward.