An interview with Anirban Basu, Chairman & CEO of Sage Policy Group
Renowned Economist Anirban Basu recently shared his insights about multifamily housing with the Delaware Apartment Association. We had a chance to follow up with him to get his perspective and to share some of the highlights from his comments.
WPM: What trends are you seeing in the multifamily housing market?
Basu: The focus seems to have shifted away from new construction and toward rehabilitation of Class B and Class C properties. The upper end of the market has been neatly saturated with new construction, and housing affordability issues abound. Out-of-town money is flooding into Wilmington, DE, pushing down cap rates. Investors are convinced that apartments that presently yield $650/month can be improved and attract much higher rents. Perhaps, but there are a lot of financially constrained people out there.
WPM: How does the multifamily housing market in this region (Delaware specific and/or Mid-Atlantic) compare to the national market (e.g., makeup, size, or other applicable measures or relevant metrics)?
Basu: Some of the strongest markets these days are adjacent markets -- markets adjacent to much larger metropolitan areas. Wilmington fits that profile neatly, as does Providence, Sacramento, and others. Primary markets have become wildly expensive, creating substantial demand in adjacent markets. Because there are so many primary markets in the Northeast and Mid-Atlantic, secondary markets here tend to be very strong. Even Baltimore has hung in despite its massive public safety issues.
WPM: What about job growth (and type of job growth) in Wilmington and/or Mid-Atlantic?
Basu: Job growth in the Mid-Atlantic is meh. The fastest job (and population) growth will continue to be in the South and West, including throughout Florida, Atlanta, Dallas, San Antonio, Nashville, Austin, Phoenix, Denver, etc.
WPM: How do you see the current economic forecast affecting the industry?
Basu: Risk of recession is elevated. Coronavirus has exposed a number of economic fragilities, including the excessively leveraged corporate sector (e.g., energy). Vacancies are about to rise.
WPM: What do you think has the most potential to advance, alter, or disrupt the industry?
Basu: Demographics. The most common age in America this year is 28. The second is 29, third is 27. Many future homeowners in the making. The demographics of the multifamily market won't be nearly as strong over the next ten years as they have been over the past ten. That said, there is a group of Millennials that will actively avoid homeownership, choosing to rent. Still, five years ago, the most common age was 23. That was a perfect setup for the multifamily boom we have experienced.
Anirban Basu is Chairman and CEO of Sage Policy Group. He is a study in contradictions. He has been called an economist with a personality, or alternatively, one with a sense of humor. He has twice been recognized as one of Maryland’s 50 most influential people. He has also been named one of the Baltimore region’s 20 most powerful business leaders. He serves as Chairman of the Maryland Economic Development Commission, teaches global strategy at Johns Hopkins University, and serves the Chief Economist function for a number of organizations around the country.