When the COVID-19 pandemic first hit the United States more than a year ago, multifamily owners worried that their tenants would stop paying their rents and that apartment vacancies would soar. But neither of these happened. Tenants, for the most part, continued to pay their rents. And in some markets, multifamily vacancy rates actually dropped.
The pandemic, then, provided yet more proof of the strength of the multifamily market.
Just ask Chris Bruzas, senior director with the Indianapolis office of Berkadia. He said that the apartment sector has performed better than expected throughout the pandemic. in his home market. The only laggard in Indianapolis? The downtown apartment market has slowed.
But there’s hope for downtown, too. Bruzas said that during the last two months, leasing activity has begun to pick up again in downtown Indianapolis.
“I wouldn’t say the downtown apartment market is fully back yet, but it is starting to normalize,” Bruzas said. “When COVID hit, there was a flight to the suburbs. The restaurants you could walk to downtown were shut down. The appeal of downtown Indianapolis wasn’t there. But now, with things reopening, we are seeing more activity in downtown.”
And if you exclude the urban areas of downtown Indianapolis? The apartment market here has been especially strong, Bruzas said.
“The last year has been on fire for Indianapolis apartments,” Bruzas said.
B-class and C-class apartment buildings have performed especially well, he said. Rents have increased on a year-over-year basis and occupancy rates have remained strong. Landlords also haven’t struggled to collect their monthly rents.
“I am surprised at how resilient the Indianapolis apartment market has been,” Bruzas said. “I see some other markets that are having more difficulties. They aren’t doing as well as we are on the collection side. At the same time, this is why investors buy in markets like Indianapolis. It is very business-friendly here. We are a good slow-and-steady market for investors over the long term.”
During a pandemic, slow-and-steady sounds good to investors.
“When unemployment spikes and everyone thinks the world is going to end, Indianapolis is a good place for investors,” Bruzas said.
This isn’t to say that it’s been all positives for investors in Indianapolis’ apartment market. Many investors have been hunting for apartment properties being offered at deep discounts. Bruzas said that those deeply reduced prices haven’t come, largely because the Indianapolis apartment market has been so resilient.
In additional good news, people are coming back to downtown, Bruzas said, with residents and out-of-towners alike heading to downtown again for the attractions and restaurants. Restaurants and retailers are reopening, which is encouraging renters to once again look at downtown Indianapolis.
As Bruzas says, Indianapolis took a different approach to COVID restrictions than did markets such as Chicago. Shutdowns weren’t as strict here. And now with people returning, downtown Indianapolis is looking lively again.
Bruzas pointed to the NCAA college basketball tournament that was held in downtown Indianapolis in March of this year. That event gave a boost to downtown and brought people back, he said.
“That kind of resurrected downtown,” Bruzas said. “People looked around and began thinking, ‘COVID might be close to being over.’ That was the first time that it looked somewhat normal in downtown. Almost all the bars were open. People were walking through downtown Indianapolis. People were flying in from New York, Atlanta, everywhere. Everything felt like it was back. The tournament was the first time in about a year that we saw normalcy in downtown.”
Will this momentum continue? Bruzas says that he sees little reason for it to slow, especially as vaccines are now widely available and COVID cases continue to fall.
Then there are the supply-and-demand issues. Demand for multifamily properties is skyrocketing, he says. Supply, though, is tight.
“It’s hard to say that we can see any higher demand than we already are,” Bruzas said. “We are already seeing higher demand for properties than we were seeing pre-COVID, and it was already a hot market then. Multifamily is a safe investment. We are seeing investors from the coasts who are looking at markets like Indianapolis for the first time.”