Share, collaborate, engage.
Three great words for us to think about as we work together to build our industry and ensure there’s a bright future for everyone involved. I was fortunate enough to facilitate PCBC’s Leader-to-Leader in late May, and there were too many takeaways to mention in one column.
I’ve distilled some of the lessons learned into six points below, which capture the tone of the conversations and the takeaways that provided insight into where the industry is at today, and where it’s going to be in the future.
The long-term outlook is optimistic, but between now and the next couple years—it's bumpy.
Bank debt is going to be constricted for two or three years, and we might see some reduction in values in certain asset classes. Certainly, the office sector is a wild card and the danger zone for lenders. For private debt, it’s there, but it’s expensive, so will we use it? Right now, I don’t think you’ll see a lot of it.
Equity’s looking for distressed deals, but guess what? There aren’t any, at least not yet. But pay attention to some of the build-for-rent side where we’ve seen “the tourists,” aka the people who came into the space that probably shouldn’t have.
Keep in mind that about 50% of homes that are closed now are being sold by public companies. That’s doubled in the last 15 years. I’ve had some conversations with the private builders in the audience, and there’s a little bit of fear about what the future holds, and I can guarantee you that one of the things we’ll see is more M&A.
One of the good things we heard a couple of different times is the United States has great demographics compared with the rest of the world. Canada has backfilled its millennials by adding more legal immigration. Let me give you some quick numbers. The U.S. has about 331 million people. We legally allow about 900,000 people into our country every year. So, 300 million and 900,000. Canada has 37 million and it allows 500,000. So, that has backfilled its number of millennials, but it has been at a cost as the cost of housing has gone way too high—that’s been the flipside.
Gen X Factor
The only thing Gen X hates more than the office is the commute. Well, let’s spin that because Gen X is our move-up buyer. What do we do inside the home to fire them up and make them go, “My office is at home?” Zonda CEO Jeff Meyers recently said he believes that we in housing should be looking at the office as our biggest competitor. Make the home the place you want to live, work, and play.
Product is evolving based on where it is and who is renting it. Schools matter to certain renters. For the horizontal apartment—one and two bedrooms primarily—you’ll see singles and couples. But when you’ve got three or four bedrooms and you’ve got a family, schools start to matter. So, it depends on your product.