Utah remains one of the most dynamic locations in the US for commercial real estate growth. This market has received national attention for its highly educated workforce and work-life balance and has led the nation in job growth. Though, the job growth has caused there to be a greater demand for workforce housing. Prior to the COVID-19 pandemic, multifamily housing supply has struggled to keep up with demand. Rent growth along the Wasatch Front has seen steady increases for the last decade, and as a result, investors seeking stability have flocked from other markets to purchase multifamily investments here.

News of the pandemic brought many businesses to an abrupt halt just a few short weeks ago and commercial real estate hasn’t escaped totally unscathed. Bill and Mary Street, brokers at Colliers International’s Pleasant Grove office, found themselves stalled on the sale of a multifamily investment in the heart of Provo City.

Although the deal was slated to close in a matter of days, the sale fell through because the buyer was concerned about the future of the economy. Understandably, some landlords are concerned about the mounting unemployment and the direct impact it will have on rental lease defaults. Fortunately, a new buyer stepped up immediately to purchase the property because he felt that investing in multifamily housing in Utah County was a good long-term strategy. 

“We can’t have a sky is falling mentality,” commented Mary Street, executive vice president of sales at Colliers. “Although we’re faced with short-term uncertainty, astute investors will view this as an acquisition opportunity. Remember the movie “It’s a Wonderful Life”? Remember Old Man Potter? When the Great Depression hit and everyone was panicking and selling, Old Man Potter was buying.”

In late February, all major markets quickly fell below the national average for rent growth due to affordability issues and the materialization of rent control, while secondary markets like Utah continued to grow steadily. Currently, all markets are being affected by COVID-19 and rental rates will most likely flatten out or in some cases decline over the short-term. But for investors who are well-positioned, the current shock may provide a pathway to opportunity. 

According to the Yardi Matrix’s Economic and Coronavirus Update national Multifamily Report, “The multifamily sector will remain well-capitalized and strong enough to weather a modest slowdown. Given the short-term nature, this could offer an investment opportunity for owners with ample cash available. Borrowing rates remain at all-time lows and financial institutions are well capitalized, marking a significant difference between the current shock and the 2008 financial crisis.”

Hopefully, some investors will take note of where the Utah market was prior to COVID-19 and continue to invest in our state, knowing that this too shall pass.