Apartment Building Investment: People aren’t buying homes anymore but still need shelter.

In the aftermath of the worst housing crisis in a generation, more people are eschewing the American dream of homeownership and embracing apartment rentals in the still-fragile economy.

Apartment Rents Rising as as people in droves stay away from home buying

Surging demand for apartments, particularly by younger consumers, has given a boost to the nation’s apartment landlords. Multifamily properties represent one of the few corners in the commercial real-estate industry where rents are rising rapidly. As such, lenders are giving the green light to multifamily construction projects even as development grinds to a halt in other property sectors.

“People weren’t buying homes anymore, but they still needed shelter, Continue reading Apartment Building Investment: People aren’t buying homes anymore but still need shelter.

Commercial Real Estate added $260 Billion to GDP last year- Hessam Nadji video via Marcus & Millichap

See the video here: http://bit.ly/JpqMck Sorry, couldn’t figure out how to load their video directly into this post. Any suggestions? Thanks.

5 Tips on how to choose the best internet listing service (ILS) for your apartment building advertising.

With so many online ad sources to choose from, how can you be sure which is best for your apartment building investment? Below Jason Velazquez, VP of Strategic Initiatives at Colliers of  offers 5 tips for choosing a great ILS:

choosing the right internet listing service ILS for your apartment building ads

Does their traffic measure up? Most Internet Listing Services (ILS) will happily provide you with their web statistics. Take the time to thoroughly review any report offered to you before you sign on the dotted line.

Check whether they’re popular in your city. Simply because an ILS is nationwide, doesn’t necessarily mean they have high web traffic in your city. A simple way to gauge an ILS’s regional market penetration is to google the keywords – apartments in city name, and then scroll through the search results until you see their site. Don’t just search using the city you are located in; type other city names that your prospects move from.

If the ILS isn’t on the front page of Google, you may want to find an alternative ad source. Studies have consistently shown the majority of renters look for their apartment using search engines.

Before you run a Google search: Continue reading 5 Tips on how to choose the best internet listing service (ILS) for your apartment building advertising.

Q2 Local Metro Apartment Building Investment Reports Now Posted.

M&M tracks 40 metro apartment investment markets and delivers quarterly reports on occupancy, rents, absorption, new construction and permits (See list below). You may have to register with them to access the reports.

Apartment Building Construction Trends in Phoenix Q2 2012
Apartment Construction Trends for Phoenix Q2 2012

If you have questions about a specific market Continue reading Q2 Local Metro Apartment Building Investment Reports Now Posted.

Happy Flash Crash 2nd Anniversary. Lack of trust in stock markets is scaring away investors…

… small and Large. Sunday was the 2nd anniversary of the May 6th Flash Crash of 2010. High Frequency Trading (HFT) insiders have hacked the stock markets so they get a sneak peak at your, and everyone’s trades before they’re executed. Think of it like one player at the poker table can secretly see your cards, and everyone else’s before they bet- Want to play in that casino?

When the HFT trading robots all lock onto the same pattern they can take a major market like the Dow Jones Industrial Average down 700 points in 10 minutes and thus we all remember the Flash Crash. Now it so happened that that time the market recovered about 70% of the loss shortly after but the damage to confidence was done.

Once bitten twice shy, investors are leaving the HFT rigged stock markets

Once bitten, twice shy. Or as Joe Saluzzi and Sal Arnuk at Themis Trading (a specialty company that trades equities for large institutions and hedge funds- stock traders not OWS supporters) put it: ” traditional retail and institutional buyers and sellers of stock have been steadily waking up to the dangers of drinking at the increasingly dangerous ”stock market watering hole”. Like the animals on the Serengeti, who for years were accustomed to sipping long and heartily at their favorite spot, retail and institutional investors now see what’s beneath the surface. And they are deciding that the drink they crave is just not worth the risk.

It isn’t hard to blame them. They have witnessed a radical transformation of the best capital allocation market system in the world, into one where:

– 13 stock exchanges cater to hyper traders who game the system, chasing exchange rebates, and leveraging speed for the purpose of a nanosecond scalping dance.
– More than 40 dark pools together trade more than 1/3rd of all shares.
– Conflicts of interest abound as exchanges own stakes in Continue reading Happy Flash Crash 2nd Anniversary. Lack of trust in stock markets is scaring away investors…

Portland Apartment Market to add 31,000 jobs this year, vacancy to fall below 3%.

As the next building cycle for the Portland area is still another year out, vacancy rates are expected to fall to historic lows across the metro. The overall vacancy rate will match the lowest on record at 2.7 percent, while the area’s lower-tier vacancy will fall to as low as 2 percent.

Marcus & Millichap notes that a lack of multifamily construction and the expansion of jobs in the region will be the prime factors behind the extraordinarily high rates of occupancy. Job growth is expected to rise 3.1 percent—from 20,500 positions created in 2011 to 31,000 positions created in 2012. Of particular significance will be the development of a new Intel facility, which is expected to create thousands of construction jobs and spur large demand for Class B and C apartments.

Portland Apartment Building Investment, less than 3% vacancy

Cap rates for trophy buildings are likely to average in the high 4-percent range, with Class A and B assets in Continue reading Portland Apartment Market to add 31,000 jobs this year, vacancy to fall below 3%.

Financing still tight in secondary and tertiary apartment markets says NMHC.

The April 2012 National Multifamily Housing Council’s Quarterly Survey of Apartment Market Conditions was conducted April 16-23, with 91 CEOs and other senior executives of apartment-related firms nationwide responding.

Capital availability lacks uniformity. Only 17 percent of multifamily firms reported that capital is available for all property types in all markets. By contrast, 36 percent said it is constrained in secondary and tertiary markets and 34 percent said it is constrained for all properties other than top-tier ones – even in primary markets.

The Debt Financing Index declined to 65 from 74. As the only index that dropped below 50 in the past nine quarters (48 in Q4 2010), borrowing conditions continued to improve for the industry. Just four percent believed conditions worsened from last quarter, compared to 34 percent who reported improving conditions.

The Equity Financing Index grew slightly to 62 from 60. One third of respondents reported quarter-to-quarter equity financing as more available, compared to nine percent reporting less availability.

See the excellent exec sum on Joseph Bernard Investment Real Estate’s blog here: Market Conditions Improve For Apartment Industry

Essex Prop. Trust on Seattle Apartment Building Investment: rents up 6.5%, NOI +11% but 10k new units coming

My Exec Sum: Seattle apartment building investment results from Essex Property Trust Q1 call:

  • Seattle demonstrated exceptional same-store NOI and revenue growth of 11.2% driven by very limited supplies of housing and job growth that exceeds national averages
  • On operating expenses we expect a 2.3% increase for the second quarter ’12 over the second quarter in ’11
  • Seattle rents were up 6.5% compared to the first quarter of 2011. So depending on the submarket, we are now 4% below to even with our prior rent peaks.
  • renewal offers for June and July averaged +6% to 8% in Seattle
  • As of April 30, its occupancy was 96.1% with a net availability of 5.1%.
  • We view this turnover activity (50-55% YoY) as healthy because it provides us with more opportunity to grow rents. Additionally, we only saw a nominal increase in move-outs due to home purchases and affordability.
  • Cap rates continue Continue reading Essex Prop. Trust on Seattle Apartment Building Investment: rents up 6.5%, NOI +11% but 10k new units coming

Stealth concessions in large US cities = falling apartment building rents? See the list via MFE Magazine

This was an eyeopener for us in the apartment building investing business: Large US cities with falling rents. The table is from TransUnion, I wonder what their sampling methodology is- And I wonder how that breaks out by asset class.

US cities with falling apartment building rents

Yes of course there are cities with rising rents but Denver rents down almost 9% in a year? In 2011? Even Chicago down almost 5%? And DC the apartment hotbed has falling rents? Supposedly their data comes from managers supplying info for tenant screening and if that’s the case it seems like there are some serious concessions being given.

Don’t blame Continue reading Stealth concessions in large US cities = falling apartment building rents? See the list via MFE Magazine

Are we overbuilding multifamily already? Or just the wrong kind? Research from CBRE Econometrics

At a Seattle apartment building investment conference recently one of the main speakers was saying that everyone who’d ever held a hammer, and their brother, was trying to build apartments in that market. That really struck a nerve in my market cycle conscious brain and was looking to get some perspective on that when a CBRE piece crossed my desk with this chart on it:

apartment building unit new construction starts 1959 to 2012

So while new unit construction starts are up significantly from the 2009 lows they are still well below the 89-08 average of about 250k. More importantly in relation to demographics we will be seeing increasing demand from growth in two of the prime renter groups, my exec sum from the piece below: Continue reading Are we overbuilding multifamily already? Or just the wrong kind? Research from CBRE Econometrics