I attended BISNOW’s (www.bisnow.com) Multifamily Annual Conference yesterday in Los Angeles. Although billed as a national conference (and attended by large, national owners and developers like Essex, UDR, MG Properties Trust, Lend Lease, CBRE), the focus for many of the discussions was the multi-family market in California. Oz Erickson from Emerald Fund pointed out that San Francisco has seen an 80 thousand increase in new jobs over the last four years but only a 10 thousand unit increase in apartments…similar (yet not as striking) numbers were presented for Los Angeles, Orange County and San Diego. This supply shortfall was blamed on a number of factors, including California’s CEQA regulations. You can Google “CEQA” for a rundown on the regulations and the lawsuits. Regardless of where you’re at on the political spectrum, the conclusions were clear: demand for multi-family units is soaring and the supply can’t keep up. From the millennials to the aging boomers who’ll be looking for senior housing options, the American suburb and the single-family house have lost some of their appeal. High walk-scores, work-life amenities and a more urban existence have replaced the green lawn as the desirable lifestyle. In fact, a new (to me) amenity was articulated: drone pad. Someone is expecting the Amazon drone deliveries to be sooner than expected I guess.

Some other information that was articulated (not confirmed, so take it with a grain of salt):

Home ownership is at a 48 year low; all-in build costs have doubled in San Francisco over the last 5 years; “adaptive re-use” appears to be an appealing answer to these high build costs; Fannie Mae/Freddie Mac will continue to be a dominant provider of  capital to multi-family business (from Willy Walker of Walker and Dunlop).

The event ended with an excellent interview with Ethan Penner http://ethanpennermcap.blogspot.com/ who imparted some wisdom to would-be entrepreneurs gleaned after a mid-career burnout: find an unmet need; this will lead to a profit margin; profit margins = entrepreneur and employee joy; don’t ever retire. Seems like good advice to us.