For multifamily executives, 2024 began with a lot of questions. Although demand for apartments was still high, new supply was a cause for concern in many markets.

“I think we were a little uncertain going into the year,” Woody Stone, president of Cushman & Wakefield Multifamily Asset Services, told Multifamily Dive. “There are so many moving pieces that it was a little bit hard to predict.”

So far, apartment portfolios have held up fairly well despite mounting supply. In the first quarter, many REITs exceeded their own forecasts and Wall Street’s expectations. Performance has been stronger than expected in the private universe of apartment management. 

Dallas-based manager Cushman & Wakefield Multifamily Asset Services, which operates 182,000 units across the country, saw first-quarter occupancy rates increase 176 basis points year over year and delinquencies fall 140 basis points.

“As we've looked at it, occupancies have been solid with all the construction,” Stone said. “And there's been a lot of construction going on. I think occupancy has taken a little bit of a hit nationally across the industry.” 

The build-to-rent segment has been a bright spot for Cushman. “We're seeing even better fundamentals and performance in the BTR space,” Stone said. “Rent growth is really solid in that space.”

Here, Stone talks with Multifamily Dive about the strength in BTR, expense pressures and mergers and acquisitions in management.

This interview has been edited for brevity and clarity.

MULTIFAMILY DIVE: When do you expect supply to burn off and fundamentals to improve further?

WOODY STONE:  If we can fast forward to 2025, there's not a lot of new construction coming online at that point, and we'll be OK. We're seeing signs of that today. We're seeing that applications are significantly up, and visits and contacts for our properties are up substantially year over year. 

If we can continue this momentum and avoid any outside influence on our space, whether it’s a recession or anything else, we can get to 2025 and be in really good shape.

What is driving the continued strength of the BTR space in the facing of mounting supply in the Sun Belt?

Older millennials are at that point of buying homes. But with single-family home sales being in the condition they’re in, they’re super challenged. I think single-family rental homes provide a great alternative to them that is a little bit different than the apartments that they probably have lived in to this point. 

Then, if you also look at the boomers — who are opting for ease and really focused on different priorities and want a single-family lifestyle but don't want the hassle of the home — then it's a really positive and really good story. 

Are expenses letting up?

To some degree, the answer is yes. I think as we look at insurance, it's still a challenge. The market saw up to 30% increases in insurance. What we're seeing today is a settling down. So, hopefully, that is the case. It's hard to sustain those increases. We're still seeing some challenges but it's not what it was a year ago.

Do you see more M&A coming in the management space?

Yes, I do. There are M&A opportunities that are out there that we've seen and we'll continue to see. If you have 10,000 or 20,000 units or even 30,000 or 40,000 units, scale is important. It is hard, as a management company, to make money at that scale.

You also really have a hard time having the expertise and resources to be competitive in the market. It’s not that there aren’t smaller, niche providers that aren't doing a great job. There are some for sure, but it's difficult. 

Do you see large owners seeking fewer managers?

Ownership groups are saying that they would like to have a little more control over their operations. They don't want to bring it in-house, as that's not cost-effective. But, they would like to consolidate under a smaller number of third-party managers. We've been the beneficiaries of that. 

I think that helps them create consistency in execution and output for their investors because they're under a ton of pressure. If they're trying to manage reporting from 10 different companies, that doesn't really work. 

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