4 Questions With JP Morgan Chase’s Kurt Stuart

The head of commercial term lending for the Northeast discusses financing, interest rates and legislative change in the late-cycle environment.
Kurt Stuart, Managing Director, Commercial Term Lending Northeast, JPMorgan Chase. Image courtesy of JPMorgan Chase

With late-cycle dynamics shaping market fundamentals, industry players are essentially heading into 2020 with optimistic expectations. This is not to say there aren’t any challenges worth keeping a close eye on going forward. “Interest rate trends have a large macro effect on the industry,” Kurt Stuart, JPMorgan Chase’s head of Commercial Term Lending for the Northeast region, told Multi-Housing News.

Rent legislation also plays a consequential role in investment activity, and although some short-term reactions in investor trends might result in a shift toward other property types, multifamily is still expected to outperform other asset classes in the long run.


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What is the current state of the multifamily market?

Stuart: Multifamily fundamentals broadly remain healthy across most major U.S. markets. Rent growth is positive and near its long-term average of 2.5 percent, while vacancy rates remain in the mid-4 percent range, below their long-term average. Should the industry reach its estimated number of units completed in 2020, the market will have delivered 90 percent more units since 2016, compared to the first five years of the recovery.

The capital markets also continue to be robust, with healthy competition from agencies, bankers, insurance companies, debt funds and CMBS active in the space. We continue to look for opportunities to broaden our products to serve a wider array of needs across the borrowing spectrum.

One area that will continue to impact investor trends is rent legislation. The uncertainty around enacted and potentially enacted legislation has decreased investment activity materially in cities like New York. As a result, some capital will divert to other markets seen as being faster growth opportunities.

What are some of the macro trends impacting the industry and how can multifamily investors best prepare?

Stuart: Interest rate trends have a large macro effect on the industry. Expected rate increases that reversed in 2019 drove a lot of financing activity in the second half of last year. We see that activity level remaining steady through 2020.

Technology trends continue to accelerate and are impacting the broader commercial real estate industry. We see clients investing in technology to make their operations more efficient at both a business level and property level. In certain markets, technology is being utilized to provide a better experience for renters, such as smart home tech from thermostats, keyless entry as well as digitized lockers for package delivery. Landlords are using these ‘low cost’ amenities as a way to modernize their buildings and differentiate from the competition. We share this type of thinking and continue to look for ways to differentiate our service in the industry. We’re streamlining and digitizing certain experiences, helping clients save time and money.

As we inch toward the end of the cycle and with legislation directed at addressing the rising cost of housing, how can we expect the multifamily industry to react?

Stuart: Rent legislation has not risen to the level of a national discussion topic since post World War I and 2019 presented some of the most broad-based legislative changes to rental housing in decades across several markets. Despite some uncertainty, the underlying fundamentals of supply and demand for rental housing haven’t changed.

Short-term industry reactions might be a shift in investment dollars to other markets, but over a long-term horizon, we still view multifamily outperforming other asset classes. The industry could use this as an opportunity to have productive discussions with legislatures about the inherent institutional challenges that have impeded the creation of more rental housing.

Where do you see growth opportunities for real estate investors in 2020?

Stuart: Though some real estate players are investing in markets outside of places like New York City, we’re still seeing clients thinking about returns on a long-term basis in the major cities. With late-cycle dynamics at play, some investors are focusing on finding long-term opportunities in markets where there is disruption caused by short-term volatility.

We see many investors finding opportunities in their home markets or building their liquidity positions, so they can move on those opportunities as they arise. As a capital provider with a fortress balance sheet, we continue to operate with a through-the-cycle mindset, which helps us remain steadfast for commercial real estate investors and developers at any point in the cycle.