When you’ve been in business as long as I have, you have the opportunity to witness change. And while every industry has evolved over the decades, I remain impressed by the degree and rapidity with which the multifamily industry, in particular, has transformed itself.
It doesn’t seem all that long ago that I was a junior banking associate at Continental Bank, parked on a big, open banking floor with a handful of other young trainees that included Equity Residential’s David Neithercut, Moran and Co.’s Mary Ann King, CBRE’s Peter Donovan, and McKinley’s Albert Berriz. Funny to think that not only would we all grow up to run successful multifamily firms, but three of us also would end up as chairs of the National Multifamily Housing Council (NMHC), the industry’s premier apartment leadership organization.
But in that time, the industry has weathered a good number of market cycles and economic storms, surfacing each time stronger, more disciplined, and more opportunistic. This last cycle, in particular, has been in many ways revolutionary for the apartment industry, which has emerged as an example of disciplined capital and sound investment practices. We’ve grown from an assembly of mom-and-pop shops to an organized collection of professionally managed enterprises.
Moreover, new apartment development has been a major driver of urban rehabilitation; transit-oriented and infill development; and adaptive reuse, all of which have improved cities across the country and generated economic benefit to the surrounding communities. Those types of benefits were a tough sell to investors back in the early 1990s, when I co-founded Capri Capital with childhood friend Quintin Primo III. Together, we convinced institutional investors there were fantastic opportunities in many urban markets that were underserved by capital, including those with large minority populations. We built our firm by successfully investing in multifamily properties in the urban markets of Chicago; Los Angeles; the Bay Area; Washington, D.C.; and other cities. We felt like pioneers back then.
Diversity of Product
Rental product, also, has been redefined, notably by the advent of the micro unit and the institutionalization of the single-family rental market. Where people used to imagine tired, old buildings, they now can see examples of beautiful architecture and design, cutting-edge construction and technology, and walkable community development. Even long-held stereotypes about affordable housing communities have been challenged in this rebound.
Similar to how leaders in the hotel industry have been able to successfully stratify their brands to serve a wider customer base—for example, Marriott owns both the Ritz Carlton and Courtyard Marriott brands—the same standards of safety, cleanliness, and service exist at both the low and high ends of the market.
But perhaps most important, the multifamily industry has begun to trade in its old-school reputation as the housing option of last resort to one of flexibility and choice. Five million new renter households were formed between 2007 and 2012. This influx has helped people in communities across the country realize that apartments work. Whether for young professionals starting out, empty-nesters looking to downsize, workers wanting to live near their jobs, married couples without children, or families, apartments help people live in a home that’s right for them.
And that needle is set to shift further as demand for our product continues to grow. More than 70 million Gen Yers are beginning to come of age, many of whom will start their adult lives in apartments. On the opposite end of the spectrum, the Baby Boomer generation continues to play an outsized role in housing, with many likely to choose to rent for its many lifestyle benefits. These demographic trends will most certainly reshape how we think about our customers, where we build, how we design our communities, and, ultimately, how we run our businesses.
Help Hone New Talent
Our industry is ripe for all kinds of innovation, where people with a fresh start and fresh focus can create something new and innovative in our space. Just consider the industry’s diverse product offerings and niche markets, which present infinite potential for new business ideas affecting everything from financing to leasing. For example, when we think multifamily, we most often envision large-scale apartment communities. However, roughly 40 percent of all apartment units are in buildings with fewer than 50 units. That fact alone suggests a huge opportunity for someone to figure out how to operate those communities more efficiently.
The good news is the industry is attracting new, young, increasingly diverse talent at the same time that consolidation is driving more established executives to strike out on their own. These changes bring energy to our industry, energy that will ultimately transform our industry again, making it more responsive, efficient, and prosperous.
Entrepreneurship often occurs organically, but the industry can help accelerate the process with more structured support from industry leaders and organizations. That’s why, as NMHC’s newest chairman, I’m very excited to promote greater entrepreneurial opportunities for our membership. I predict we will continue to see new ventures formed from longtime industry veterans seeking new, later-life challenges. For instance, my good friend Ken Bacon, formerly the head of Fannie Mae’s multifamily business, has launched a new company, Railfield Partners, to make niche investments in the apartment sector.
Of course, we also need to support our younger members in their new ventures. For this reason, I’m also delighted to increase my involvement with NMHC’s Emerging Leaders program, which provides leadership access, education, and networking opportunities for the industry’s rising stars. It’s important for today’s multifamily leaders to play a role in shaping the industry’s succession plan and fostering new entrepreneurial endeavors.
I ask everyone in the multifamily industry to please join me in working to identify and create more ways to help develop these new entrepreneurs. Because you never know—the industry’s next innovators and leaders could already be among us, whether working in the corner office or in the trainee pool like I was more than 30 years ago.
Daryl J. Carter is founder, chairman, and CEO of Avanath Capital Management, an investment firm focused on conventional and affordable multifamily investments and management. Carter recently was elected chairman of the National Multifamily Housing Council, where he will serve a two-year term.