by Lynn M. Owen
I seem to get asked to forecast one thing or another every day by clients, employees, lenders, appraisers and prospective clients. Sometimes it feels like I need a crystal ball to find an answer. Everyone wants a forecast that fits into his or her particular real estate project: builders want to build, bankers want to lend, condo converters want the market to improve yesterday and onsite staff wants to know when they can expect to get a break from the proverbial hot seat.
If you listen to all of the “industry experts”—and there are many of us who feel we are experts—the outlook appears to be pretty depressing. Media reporting tends to perpetuate any bad news, which therefore perpetuates the problem.
I’m not here to give you statistics or to quote what the experts tell us. In fact, I am sick to death of their news. I don’t think I can sit through one more presentation that paints a doom-and-gloom scenario.
I am an optimist and a realist who looks at the glass as being half full, sees the silver lining in every cloud and who also knows that we are not renting to the 10.3 percent of unemployed people in our state. We are focused on the 89.7 percent who have jobs and need a place to live.
When I look at our overall multifamily housing portfolio and review the past 12 months, it looks to me as if we are definitely in a recovery phase today. Occupancy has stabilized at great percentage levels and we are starting to witness the disappearance of concessions in almost every market.
People are still giving notices to vacate because they have lost their jobs, but those numbers are diminishing every month. Home purchases are on the rise, so I see more and more people moving out of apartments when they purchase their own home.
The past year provided a great lesson in discovering what rents each market will bear. So when you decreased your rents to a level where you could actually consistently lease apartments without offering additional concessions, you found your revised market rent.
This year will show flat rent growth from the revised 2009 market rent levels, but there will be an overall growth in collections because of concessions burning off and decreased vacancy rates.
Remember, the true industry experts are the people on the front lines. When onsite professionals are happy to come to work, happy to turn in their weekly leasing reports and happy about being able to brag about their occupancy levels, then you know what time it is, right?
It is the time to put them back on that proverbial hot seat and tell them to increase rents. I believe we will see that by end of Q3 2010.
Lynn M. Owen is Principal/Director of Marketing and Business Development for Glacier Real Estate Services, Seattle. She can be reached at 206/618-6269 or lowen@glacierres.com. She presented these thoughts during Trends Rental Housing Management Conference, Dec. 8, 2009, in Seattle.