Tag: apartment building investment cycle

This recovery is “basically normal if not a bit better than expected” historically speaking says Hassam Nadji in GlobeSt.com

“History reminds us that a recovery from the simultaneous shocks of a financial crisis and a major recession require significantly more time and stimulus than a cyclical contraction, a process that could extend five to eight years compared to the more typical two- to three-year span following a cyclical recession. The pattern observed thus far since the recovery began is basically normal if not a bit better than expected.”

Remember that 2.5 million of the jobs lost were in construction and financial services (including mortgage origination mills and RMBS/CDO/CDS manufacture) so that returning to the same level of employment in those sectors would imply another bubble formation.

Now on the other handif job creation continues to fall off… See the whole GlobeSt. piece here: Weak Jobs Report Another Bump in Road to Recovery

Top 10 US Cities for new apartment building permits.

Coming soon to these big MSAs, lots of new apartments:

  1. New York-Northern New Jersey-Long Island
  2. Dallas-Fort Worth-Arlington
  3. Washington, D.C.-Arlington, Alexandria
  4. Los Angeles, Long Beach-Santa Ana
  5. Houston-Sugar Land-Baytown
  6. Seattle-Tacoma-Bellevue
  7. Austin-Round Rock-San Marcos
  8. San Francisco-Oakland-Fremont
  9. Chicago-Joliet-Naperville
  10. Miami-Fort Lauderdale-Pompano Beach

For details see: MFE Mag online

Will they be able to fill them all? How will older properties in these markets fare? Let us know what you’re seeing-

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.

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.

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

M&M Apartment Building Investment call: Opportunities exist in secondary mkts & value add, tertiary still lagging

Marcus & Millichap Q1 call on the apartment building investment climate this morning:

  • Year over year manufacturing jobs grew 238k. Manufacturing = 20% of GDP but gets no press, where as single family housing < 2% gets all the coverage.
  • There is a historic % of 18-34 Y/Os still living ‘with the parents’ but they are also getting a larger proportion of the new jobs. (See chart) Good for apartment building investors as these people typically become renters when they do move out.

pent up apartment building demand

Portland Apartment Building Market: occupancy drops but rents still rising according to report

Apartments are a little easier to come by in the Portland area, but that’s not slowing down rent increases across much of the market.
According to the Metro Multifamily Housing Association which released its latest survey Wednesday:

  • Vacancy across the metro area grew to 3.72% from 3.34% late last year.
  • Rents climbed 3% in the same period, reaching $1 a square foot per month across the metro area.
  • Average two-bedroom unit now rents for $771, up $28 a month compared with six months earlier.

Portland Apartment Building Investment Cycle Occupancy and Rents
The Portland area has one of the lowest Continue reading Portland Apartment Building Market: occupancy drops but rents still rising according to report