Apartment COVID-19 Adjustment Guide

April 2, 2020

Analysis provided by:  Jonathan Rivera, Director

I’ve gone through a few COVID-19 appraisal reviews and there appears to be a coalescing around two main adjustments to the cashflow: higher near-term vacancy/credit loss and lower near-term rent growth (Years 1 and 2).  These adjustments reflect the general themes I’ve heard from various apartment managers and brokers in most markets.  In order for the Direct Cap, Sales Approach, and Cost Approach to line-up, other adjustments will need to be made.  Below is a general guide for remaining COVID-19-related apartment appraisal reviews of Q1 and for draft apartment appraisal reports for Q2.


  • Increase of near-term Vacancy/Credit Loss (Years 1 – 2)
  • Decrease of near-term Rent Growth (Years 1 – 2)
  • Increase of vacant Retail Lease-Up and general Retail Vacancy (if applicable)

Direct Cap

  • 25 to 50 basis point increase in the OAR, to reflect investor expectation of lower rent growth.  It is noted that spread between the OAR and Terminal Rate will narrow, as a reflection of heightened near-term risk versus diminished long-term risk.

Sales Comparison Approach

  • Include downward adjustment for Market Conditions, due to superior market conditions of the comparables at the time of sale – if they transpired before the COVID-19 pandemic.

Cost Approach

  • Downward adjustment to the comparable Land Sales due to superior market conditions – if they transpired before the COVID-19 pandemic.
  • Include a downward adjustment for External Obsolescence, due to the economic turmoil caused by the COVID-19 pandemic.