About 30% of renters at the 10 Austin-area apartment complexes CSA Realty Group manages did not pay rent in April, CSA President Andrew Creixell estimated.
The company is still collecting May rent — like most property managers, as late fees have been abated — and Creixell said this month’s collections could be better. Along with office, industry and retail space, CSA Realty manages class B and class C apartment buildings where, he said, the majority of renters work in the hospitality and retails sectors hit hard by Covid-19 closures.
Property management companies are paid based on a percentage of the rent collected.The fewer dollars they collect, the fewer they make.
“We are kind of in the same boat as owners,” Creixell said. “We benefit when times are good, and we are hurt when times are bad.”
Though they are getting paid less right now, property managers’ overhead remains the same or is higher as they haven’t laid off workers, they still have the same bills to pay and some are cleaning common areas more due to the virus. Renters can’t be evicted for non-payment until at least mid-May either per city, county and state rules.
“It is part of being the captain of the ship, I guess — take the good and the bad and ride it out,” Creixell said.
April is typically the start of the apartment leasing season and when rents will begin to tick up. Instead, because of the pandemic, rents in Austin are declining for the first time in years as moves have slowed down dramatically due to shelter-in-place orders and job losses.
And, it’s unclear when conditions could improve as it is uncertain when most workers will return to their jobs or receive enough unemployment benefits to be able to get up to date on their rent.
Though they are getting paid less right now, property managers’ overhead remains the same or is higher as they haven’t laid off workers, they still have the same bills to pay and some are cleaning common areas more due to the virus. Renters can’t be evicted for non-payment until at least mid-May either per city, county and state rules.
“It is part of being the captain of the ship, I guess — take the good and the bad and ride it out,” Creixell said.
April is typically the start of the apartment leasing season and when rents will begin to tick up. Instead, because of the pandemic, rents in Austin are declining for the first time in years as moves have slowed down dramatically due to shelter-in-place orders and job losses.
And, it’s unclear when conditions could improve as it is uncertain when most workers will return to their jobs or receive enough unemployment benefits to be able to get up to date on their rent.
Occupancy of apartments in the greater Austin area was at 91.1% in April up slightly from 90.8% the previous month, according to ApartmentData.com.
Austin saw negative absorption of five apartment units in April — meaning less units were occupied than the previous month — due to shelter-in-place orders, Reed said. In April 2019, 1,217 more units were rented than in the previous month.
“We are interested to see what happens in May now that it has been lifted and people can start moving,” she said. “We are keeping a close eye on it.”
Another 4,500 apartments will be delivered before the end of the year, and it’s unclear how quickly those units will lease, Reed said.
It’s hard to forecast how fast Austin and the rest of the country will rebound from the pandemic, and if the capital city will continue to see a huge migration of new residents.
The Austin metro saw 6,900 job losses from February to March, according to U.S. Bureau of Labor Statistics data compiled by the Austin Chamber of Commerce. Jobs are projected to fall by 5.1% in the metro during 2020, according to a survey by IHS Markit Ltd.
But, there’s a lot of optimism that the pandemic-related slowdown will be brief in Austin, and that the city could even benefit with more moves and corporate relocations from areas harder hit by Covid-19.
Property owners are still doing due diligence on new deals. Developers continue to file site plan applications for new multifamily projects each week with the city of Austin Development Services Department.
Capitol Market Research President Charles Heimsath said he expects to see multifamily construction starts to slow in the second quarter. He doesn’t think the slowdown will last longer than that, so it won’t be much of a hiccup for the industry.
“If you have a project that is close to starting, people that I have talked to said they are having a little bit more difficulty finding financing,” he said.
Multifamily projects currently in the entitlement phase are continuing, Heimsath said.
Reed said she is paying close attention to if renters begin vacating efficiency and one-bedroom bedrooms and begin taking on roommates and renting two- and three-bedroom apartments instead.
“We might all of a sudden have a huge availability of one bedrooms and efficiencies across the city,” she said.
Austin-based Roscoe Property Management said the collection of apartment rent in May has been strong and slightly ahead of what they were for April at this time.
“We were concerned that May could be worse, but we worked closely with our residents and our teams to create incentives for payment,” RPM Executive Vice President Angelique Goodnough said in an email. “We have maintained a high level of service through social media and personnel interaction.”
RPM announced April 14 that 95% of renters in the 38,000 apartments it manages in Texas, Arizona, Florida and Colorado paid their rent in April. They expected more renters to continue paying through the rest of the month.
Brian Flaherty, president of Austin-based Sandalwood USA, said his team recorded similar collections in April across the 6,500 apartment units it manages across the country. Austin collections were also around 94%. He expects about the same for May.
“What we are noticing is with all of the abatements on late fees, people are paying their rents much later,” he said. “Because they don’t have that late fee that kicks in … they are not paying all the way up to the end of the month.”
Late collections or no payments definitely affects cash flow for apartment managers and owners, Flaherty said. Sandalwood is seeing revenue down about 10% to 15%.
“We have to float the bills,” he said. “If you eventually collect all of the money that’s fine, but you have a cash timing issue.”
Flaherty said he doesn’t think many apartment owners are seeking forbearance on their mortgages right now due to strict guidelines.
Publication: Austin Business Journal