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As passive multifamily investors, understanding market trends and drivers is crucial for making informed decisions. One significant factor worth exploring is the impact of major employers and their return-to-office policies on your investment potential.
The Hybrid Landscape for Return-to-Office:
While some companies, like Tesla, mandate full-time in-office presence, many major employers like Google, Meta, and Apple, particularly in tech hubs like Mountain View and Menlo Park, have adopted hybrid models. This shift creates a nuanced landscape for multifamily investing, with implications for different markets.
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Data-Driven Insights:
Our analysis, which incorporated 10 major employers that have implemented some form of a return to office policy, reveals interesting insights:
•Tech Hubs and Rental Growth: Giants like Google, Meta, and Apple in hubs like Mountain View and Menlo Park are implementing hybrid models, potentially impacting rental growth projections (0-2% in these markets). This could dampen demand compared to pre-pandemic levels.
•Cost of Living Matters: High-cost markets like New York and San Francisco (270+ Cost of Living Index) see slower projected rental growth (1-3%) compared to affordable markets like Orlando (99 Cost of Living Index) with 2-4% projected growth. Consider cost of living alongside return-to-office policies for a holistic view.
•Remote-First is Niche: Companies like GitLab with fully remote workforces don't directly drive demand in specific markets. However, they contribute to the growing trend of location independence, potentially impacting migration patterns and indirectly influencing markets with strong remote job opportunities.
Surprising Conclusion
While the table showcases the return-to-office policies of major employers and their corresponding markets, the data suggests they don't single-handedly move markets as much as some might think. This is good news for passive investors, as it encourages a strategic, diversified approach rather than relying solely on the presence of a specific company.
Mitigating Risk Through Diversification: Here's Why:
•Market Dependence: By focusing on markets heavily reliant on one or two major employers, you expose your portfolio to significant risk if those companies change their policies or relocate.
•Spread the Risk: Diversifying geographically across markets with diverse economic drivers and varying return-to-office dynamics mitigates this risk. Consider including markets with a mix of industries, government institutions, and educational centers, along with major employers, to create a well-rounded portfolio like we’re currently doing with our Blue Lake Multifamily Fund.
Key Takeaway
Major employers are important, but they are not the sole determinant of market success. Utilize the data, consult with real estate professionals and your financial advisor, and stay informed to navigate the ever-changing multifamily investment landscape. Conduct further research on specific markets and consider factors like local economies, infrastructure, and long-term development plans before making any investment decisions.
As always, Be Bold, Be great, and Keep Pushing Forward!
P.S. If one of your priorities, like mine, is building and preserving your wealth through multifamily real estate investments, click here to download my new eBook: The Ultimate Guide to Creating & Preserving Your Wealth.
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About Ellie Perlman
Ellie Perlman is the founder of Blue Lake Capital, a commercial real estate investment firm specializing in multifamily investing throughout the United States. At Blue Lake Capital, Ellie partners with both institutional and individual investors to grow their wealth by achieving double-digit returns by investing alongside her in exclusive multifamily deals they usually don't have access to.
A defining factor of Blue Lake Capital’s strategy is founded in utilizing machine learning/artificial intelligence throughout the course of all acquisitions and asset management. This advanced technology enables the company to produce accurate and data-driven forecasting for all assets on a market, property, and even tenant basis. In doing so, Blue Lake is able to lead commercial investments with the full capabilities of today’s technology.
Ellie is the founding host of REady2Scale, a podcast that highlights the assets, processes, and strategies for the multiple approaches to successful real estate investing.
She started her career as a commercial real estate lawyer, leading real estate transactions for one of Israel’s leading development companies. Later, as a property manager for Israel’s largest energy company, she oversaw properties worth over $100MM. Additionally, Ellie is an experienced entrepreneur who helped build and scale companies by improving their business operations.
Ellie holds a Masters in Law from Bar-Ilan University in Israel and an MBA from MIT Sloan School of Management.
You can read more about Blue Lake Capital and Ellie Perlman at www.bluelake-capital.com.
*The content provided on this website, including all downloadable resources, is for informational purposes only and should not be interpreted as financial advice. Furthermore, this material does not constitute an offer to sell or a solicitation of an offer to buy any securities.