Apartments to Benefit From Boomers NOT Aging in Place
Digested From "Aging Boomers to Boost Demand for Apartments, Condos and Townhouses"
Wall Street Journal (01/07/14) Leubsdorf, Ben
The aging of the nation's Baby Boomer population could reshape the United States' residential real estate market and economy in the coming years. As this demographic becomes older, many will move out of the houses where they raised families and move into smaller, cozier apartments, condominiums, and townhouses. This is a normal transition for people of such age, but it represents a potentially massive shift in the nation's housing demand. Based on demographic trends, the U.S. should see a stronger rebound in multifamily construction than in single-family construction in the years to come. Kansas City Fed senior economist Jordan Rappaport writes: "By the end of the decade, multifamily construction is likely to peak at a level nearly two-thirds higher than its highest annual level during the 1990s and 2000s."
At the same time, the shift from single-family dwellings to multifamily housing will almost certainly have implications for fiscal policy, monetary-policy analysis, and possibly even local zoning codes. Rappaport comments, "Suburbs seeking to retain aging households may need to re-create a range of these urban amenities and enact some rezoning to encourage multifamily construction." He adds that the projected shift from single-family homes to apartment, condo, and townhome living will likely put downward pressure on single-family prices. "It will shift consumer demand away from goods and services that complement large indoor space and a backyard toward goods and services more oriented toward living in an apartment," he states. "Similarly, the possible shift toward city living may dampen demand for automobiles, highways, and gasoline but increase demand for restaurants, city parks, and high-quality public transit." Rappaport concludes that those companies and governments that correctly anticipate such changes stand to reap the biggest rewards.
Market Trend Insights
KC Fed Says Residential Building Boom to End ... But When?
Digested From "KC Fed: Roof Will Cave on Residential Building After 2020"
Kansas City Business Journal (01/08/14) Alonzo, Austin
A new report from the Federal Reserve Bank of Kansas City forecasts that residential construction will grow for at least the next six years, but then warns that it will likely go into sharp decline after 2020. The report, titled "The Demographic Shift From Single-Family to Multifamily Housing," was penned by KC Fed senior economist Jordan Rappaport. He maintains that slowing U.S. population growth will eventually drive down demand, particularly in the single-family housing sector. Such a turn of events could send the residential construction industry into extended decline by the early part of the next decade. According to Rappaport, single-family housing starts are projected to increase by 150 percent from 2012 to 2021 and then will drop to a level not seen since the early 1990s -- a downward spiral that will likely continue through 2035. Meanwhile, multifamily construction is forecast to increase by nearly 10 percent annually through 2016, peaking in 2019. Then, Rappaport expects, multifamily construction will reach levels not seen since the mid-1980s. Inevitably, the market eventually will contract due to lower overall housing demand -- a trend that could have an array of social and economic consequences, contributing to a new urban migration sometime in the next decade.
And the Award for Tightest U.S. Apartment Market Goes to...
Digested From "Report: New Haven Area Tightest U.S. Rental Market"
Hartford Courant (Connecticut) (01/07/14) Gosselin, Kenneth
Reis Inc. reports that the New Haven, Conn., market posted the lowest apartment vacancy rate for the third consecutive quarter. For its results, the research firm tracks a total of 79 U.S. metro areas. New Haven's apartment vacancy rate was 2.2 percent as of Dec. 31, down 0.4 percentage point from a year earlier. Average monthly rent, meanwhile, climbed 2.5 percent to $1,154. Nationwide, the apartment vacancy was 4.1 percent in 2013's October-through-December period, and average rent was up 0.8 percent to $1,083 a month. "Clearly, New Haven is very popular right now," remarks Matthew Nemerson, the city's economic development administrator. "New Haven is clearly an attractive place even if you are not working in New Haven." Reis researchers state that Yale University's dominant presence in the city creates strong demand in the local rental apartment market, both from students and Yale employees. Nemerson adds that developers are responding to the need for more rental housing, with 1,000 new units expected to be added to the downtown area and its immediate surroundings in the next few years. One of the more innovative plans is to add apartments to the upper floors of the former Union Trust building.
Will 2014 Be a Year for San Diego to Build on?
Digested From "2014 Construction Predicted to Go on Upswing"
San Diego Daily Transcript (01/08/14) Rico, Carlos
Construction executives in the San Diego area are forecasting that 2014 will be a stronger year for their industry than last year, although increased fees could have a negative impact. Brian Jordan, executive vice president at Helix Electric, is among those who are optimistic that the local construction industry will improve throughout the year. Jordan, who is also president of Associated General Contractors' San Diego chapter, states, "You see work slowly picking up and coming back to healthy levels, especially in the multifamily and commercial sectors." Statistics from the Building Industry Association shows that building permits were pulled for 5,314 multifamily housing units and 2,305 single-family homes in San Diego County during the first 11 months of 2013 -- an increase from 4,319 multifamily units and 2,100 single-family units in 2012. Jordan cautioned that developers may see bids go up because wages and construction commodities are increasing. Experts in the region said their main concern is how San Diego's increased housing impact fee will play out. The fee charges developers 1.5 percent of 1991 costs to build commercial developments.
Downtown Madison Is the Capital of New Apt. Construction
Digested From "New Downtown Development Boom is All About Apartments"
Milwaukee Business Journal (01/03/14)
In Wisconsin, downtown Madison is seeing a boom in new development, and it's being driven largely by an interest in new, high-end, big-city-style apartments. "I've spent almost two decades working on downtown issues, and I've never seen this level of development," says Alderman Mike Verveer. "It's left a lot of us very busy trying to keep up." Of the $337 million worth of new development projects in the city this year, approximately two-thirds are new apartment communities. The majority of these projects are in the central city and most include structured parking and commercial space. Those closest to the action say several factors have contributed to the boom: historically low interest rates, a pent-up demand for new rental housing, the ongoing draw of the university, and the significant growth of Epic Systems.
Deals and Transactions
UDR Bags the Big Sac by Selling Its Last Apartments There
Digested From "UDR Exits Market by Selling Apartment Complexes"
Sacramento Business Journal (01/06/13) Van der Meer, Brian
UDR recently exited the Sacramento market with the $81.1 million sale of its last two apartment communities there -- Foothills Tennis Village in suburban Roseville and the Woodlake Village Apartments near California State University Sacramento. Both were owned by UDR for about 15 years. Multifamily housing brokerage firm ARA handled the sale. ARA Pacific's Mark Leary, who served as exclusive adviser on the transactions, observes, "Both assets attracted significant interest from multiple buyers due to location and synergy with potential buyer’s current operations." The sales fulfilled UDR's asset disposition guidance for 2013, released back in last year's first quarter and projecting the company would dispose of $150 million to $250 million in apartments for the year. The two Sacramento-area apartment communities went on the selling block this past September, with a combined asking price of $85 million.
Northstar Looks to the Southwest for Latest Apt. Buys
Digested From "Northstar Properties Buys Two Tulsa Apartment Complexes"
Tulsa World (01/11/14) Evatt, Robert
Northstar Properties, one of the largest apartment owners in Oklahoma City, is looking to expand eastward. The firm recently acquired two Tulsa apartment communities -- the 424-unit Cascades at Southern Hills and the 256-unit Coventry Park -- for a combined $22.4 million. Greystar, a South Carolina-based apartment ownership entity was the seller. Founded a decade ago, Northstar has had ongoing plans to expand into the Tulsa market. The two apartment communities aren't expected to get any major changes as a result of the transaction. Northstar, though, does expect to continue the previous owners' strategy of remodeling apartments and installing new appliances as residents turn over. Northstar President Kristi Carlson remarks, "Right now we're just getting in there and getting things on our procedures." Since 2004, her firm has specialized in acquiring older apartment communities and holding on to them as long-term investments.
Seattle, Silicon Valley Ring True for TruAmerica
Digested From "TruAmerica Likes Seattle, Silicon Valley"
GlobeSt.com (01/07/14) Rossenfeld, Carrie
TruAmerica Multifamily is eyeing apartment communities for acquisition in two major Western markets -- Seattle and the Silicon Valley -- both of which have strong workforce housing potential. To this end, the Los Angeles-based property investment firm recently acquired a 309-unit apartment community in the Seattle submarket of Federal Way for $54 million. Cornerstone Advisors/Legacy Partners was the seller. TruAmerica President and CEO Bob Hart states, "Federal Way is a very good market for workforce housing. There's not a lot of new construction there. But there's strong demand, and there’s good proximity to jobs in Seattle." Hart went on note that when he was CEO of Kennedy Wilson, that company owned numerous apartment communities in Federal Way. Earlier, TruAmerica's paid $38.3 million for the Vineyards in Gilroy, Calif. The firm now boasts a nearly 10,000-unit apartment portfolio.
Why One Office REIT Is Now a Major Apartment Owner
Digested From "Office Landlord Changes Course"
Wall Street Journal (01/08/14) Wotapka, Dawn
Mack-Cali Realty Corp. is shifting its focus from suburban office buildings to apartment communities. It has been two years, in fact, since Mack-Cali CEO Mitchell Hersh first began divesting office buildings that he and his staff felt no longer fit the company's strategy. Suburban offices had been a gold mine for years, but the niche started to sour after the financial meltdown and has yet to recover. In fact, many analysts anticipate the suburban office market will remain in the doldrums for years to come. Mack-Cali's management agreed to begin focusing on the apartment sector. Later this month, for instance, construction will commence on a 69-story apartment tower in Jersey City, N.J., that will rank as the tallest residential tower in the Garden State. Rental units will cater to young, urban professionals.
The change in strategy is being closely watched in the world of REITs, where companies tend to pick one type of commercial real estate -- office buildings, shopping centers, hotels -- and stick with it. Among those most intrigued is J.P. Morgan analyst Anthony Paolone, who states, "It's pretty unique in the REIT landscape for a company to abandon its longtime strategy and try something new." Suburban office space has been ailing for some time as firms downsize, more employees telecommute, and much of the Millennial generation opts to live and work in urban settings with access to public transit. Hersh concludes, "Companies are doing more with less, putting more people in lesser amounts of space. There's still a need for office space. It's just not what it was." Meanwhile, Mack-Cali's apartment holdings have expanded to over 3,300 units in the last year. The REIT expects to break ground on over 2,000 apartments in the new year. Within five years, it plans to have a portfolio of about 17,000 units.
The Search Is Over on Iowa's New Rental Housing Website
Digested From "20,000 Rental Units Now Listed on State Website"
Des Moines Register (01/07/14)
IowaHousingSearch.org, the state's free rental listing service, is now up and running. According to Iowa officials, approximately 20,000 rental units have been listed on the site by 250 apartment owners statewide. Each listing includes information on such things as income requirements, handicap accessibility, and proximity to public transportation and grocery stores. Officials said one goal in developing the site was to provide a place for people with disabilities or housing vouchers to find more information about apartments that fit their needs. The site also includes rent and moving-expense calculators.
Three Reasons Why Tulsa's Apt. Sector Is Tops in Affordability
Digested From "Tulsa Ranked Number One in Apartment Affordability"
Tulsa World (01/09/14) Evatt, Robert
According to a new list by Apartmentguide.com, Tulsa is the most budget-friendly metro area in the nation for apartment residents. Tulsa's affordability is influenced by three factors -- the general low cost of living, low construction costs, and few barriers to new apartment construction. The ranking combined the website's own listing data with the third-quarter 2013 Cost of Living Index by the Council for Community and Economic Research. "The Tulsa region's outstanding value for businesses and resident contributes greatly to the continued growth and marketability of our area," said Mike Neal, president and CEO of the Tulsa Metro Chamber. David Forrest, an apartment specialist at CB Richard/Ellis/Oklahoma, adds that his firm's internal data indicates that Tulsa's median monthly apartment rent was $641 in 2013's third quarter.
Which Apartment Investment Firm Is Selling 8M Shares?
Digested From "Kennedy Wilson to Sell 8M Shares"
Kennedy Wilson Holdings last week announced plans to sell 8 million shares of common stock priced at $21.45 in an underwritten public offering. The real estate investment and services firm has had a successful year following an acquisition strategy targeting value-add apartment communities on the West Coast. The company recently spent $167 million on three apartment communities in California and Washington, totaling 456 rental units. The acquisition brought its portfolio above 17,000 total apartments. Kennedy Wilson Multifamily Group President Kurt Zech remarks, "We are value-add, opportunistic buyers, and we generally buy in submarkets around the major metropolitan areas. We often will buy in submarkets that get less attention so we can get higher yields." Deutsche Bank Securities, which has been tapped as the sole underwriter, has been given a 30-day option to purchase up to 1.2 million shares. Kennedy Wilson plans to use the proceeds for future acquisitions and co-investment opportunities, as well as for general corporate purposes.
Legal/Legislative Did You Know
NFHA Ensures Discrimination Complaints Are Being Heard
Digested From "NFHA: Deaf Discrimination at Apartment Complexes"
KVUE.com (01/09/2014) Holloway, Jessica
In Texas, three apartment communities have come under fire after an investigation by the Austin Tenants' Council found that their owners and managers have not been treating deaf people fairly. The National Fair Housing Alliance (NFHA), the National Association of the Deaf, and Council held a Jan. 9 news conference online to file complaints against the three Austin communities. Kathy Stark with the Council remarks, "I want to educate the populous that's it's not alright to discriminate and also educate the deaf community they have rights." The manager of one of the communities -- Pecan Grove -- said her staff does not discriminate against anyone and pointed to several visually impaired residents. Stark said she does not feel a lawsuit will be needed if changes are made. For now, the complaints will be filed with HUD. They were collected during a nationwide undercover investigation that documented how deaf and hard of hearing rental applications were treated compared to others who were not deaf. The NFHA probe covered 98 cities, including Austin, and reportedly uncovered a significant pattern of discrimination.
Apartments May Soon Be on Closer Inspection in Lawrence
Digested From "Proposal May Require Inspection of All Rental Units in Lawrence"
KSHB-TV 41 (01/09/14) Gutierrez, Andres
If a proposed ordinance is passed, people who rent apartments in Lawrence, Kan., could soon have city-issued placards placed in their homes. Currently, only single-family home rentals are required to undergo inspections. If the proposal passes, approximately 18,000 apartments in the city will, too. City Commissioner Jeremy Farmer wants those who rent to be aware of whom to call when owners and managers are not properly maintaining their community. Under the proposal, placards with such information would be posted inside each apartment. But not everyone supports the measure. Scott McCullough, director of planning and development services for the city of Lawrence, said it would cost the city more than $300,000 for inspection at all rental units. McCullough points out, "There are options such as the city mailing each [resident] -- each dwelling unit -- information on how to contact the city if minimum housing standards aren't being met at any one time." The proposal will be up for a vote later this month.
The Fuse Is Lit for NYC Apartment High-Rises to Get Safer
Digested From "Investigation Into High-Rise Fire Safety Measures"
WABC.com (NY) (01/07/14) Hoffer, Jim
After a fatal high-rise fire in Manhattan earlier this month, investigations are underway as to why older residential buildings are not held to the same safety standards as commercial buildings in the city. Statistically, there are more deaths in residential high-rises than in commercial buildings. However, two key fire protections are not required in older high-rise apartment buildings. In 1998, the City County began requiring all new residential buildings to have fire sprinklers. But that leaves the majority of older buildings without them. Fire experts say that a public address system, as is common in many office buildings and hotels, could have made a big difference in the recent fire. But those are only required in high-rise apartment towers built after 2008. Retired Deputy Fire Chief Vincent Dunn says a public address system would allow an incident commander to quickly communicate with people in their apartments during a fire to instruct them as to what to do, such as do not flee. "Without the information," Dunn concludes, "it's more likely people make a mistake, leave the apartment, and die in hallway and stairways."
Enhance Your Scholastic App-titude with the Official App of the 2014 NAA Student Housing Conference & Exposition
Stay connected and elevate your conference experience when you download the official mobile app for the 2014 NAA Student Housing Conference, March 3-5, 2014 in Las Vegas at the ARIA Resort.
With all these cool devices everyone is walking around with nowadays, it only makes sense that you’d be first in line to download the brand-new, official 2014 NAA Student Housing Mobile App, allowing you the ability to:
• Organize and plan your conference schedule
• Choose the education sessions that fit your needs
• Interactively find exhibitors with whom you’d like to visit
• Receive important real-time communications regarding the event
• Follow and join in on the show chatter with the built-in Twitter feed
• Keep up with industry news with RSS Feeds
• Upload photos and share your event experiences
• Connect with colleagues via the Friends feature
The free app is available for both Apple and Android operating systems.
Can’t be in two places at once? Can’t choose between two equally interesting speakers? NAA’s Education Institute (NAAEI) is once again presenting its “REWIND” program, offering 14 PowerPoint-synced audio sessions from the 2014 NAA Student Housing Conference & Exposition. Don’t stress, just pre-order REWIND with your conference registration for just $99!
Awaiting you is actionable intelligence and turnkey solutions perfect for helping you achieve your personal and professional goals. Register today and keep checking www.naahq.org/shc for schedule, housing and the latest announcements. And remember to use the official hashtag #NAAStudentConf to engage, discuss and follow the conference.
Drum Roll Please: 2014 NAA Education Conference & Exposition - Stay Tuned For A Major Announcement Tomorrow
Be on the lookout tomorrow, Wednesday, Jan. 15 for big announcements on the Friday General Session speakers and the Saturday NAA Awards Breakfast Special Guest Speaker for the 2014 NAA Education Conference & Exposition, June 18-21 in Denver.
All three (yes, three!) are highly successful entrepreneurs and recognized leaders in their respective industries who will no doubt leave you motivated to “Reach New Heights” in your career and business. NAA has earned its reputation for brining world-renowned speakers—representative of some of the greatest minds and business entrepreneurs in the world, the value of which alone covers the price of admission—to speak to 2014’s largest, most important gathering of multifamily housing professionals.
Find and follow NAA and NAA Education Conference on Twitter and like NAA on Facebook to keep up with the latest, up-to-the-minute announcements from the National Apartment Association.
Invest in your company and your career today. Register now and remember that the largest discounts go to those who sign-up early. Have four friends? Register as a group to take advantage of even more savings!
And, make sure to book your housing as soon as you register—rooms will go fast and you will be unable to book without first registering. Visit the Education Conference website for information and reservations for all official NAA Education Conference hotels.
Former Sen. Alan Simpson to Speak at NAA Capitol Conference
Former U.S. Sen. Alan Simpson (R-Wyo.) will provide a candid look on politics, the economy and the hard choices that America’s leaders face during the 2014 NAA Capitol Conference’s keynote luncheon on March 11. His address is entitled “The Moment of Truth: Confronting Issues in America.” Known for his quick wit, Simpson addresses controversial topics on the national agenda with honesty and provides sensible solutions for moving the country forward.
Invest in your political capital by participating in the 2014 NAA Capitol Conference – the only national event focused on apartment industry advocacy. The annual conference will be held on March 11 in Washington, D.C., followed by the industry’s Lobby Day on Capitol Hill on March 12 (The spring NAA Board of Directors and committee meetings precede the conference on March 9 and 10.). Registration is now open.
The NAA Capitol Conference will prepare you to carry your message on major industry issues as an informed, effective, confident advocate. This year there will be a new special event, expert national speakers on policy and politics, and more training and educational sessions for new and long-time attendees alike.
Be Part of the 2014 Get Reel Video Challenge
In honor of Apartment Careers Month in February, The National Apartment Association Education Institute (NAAEI) is calling for video submissions for it's 2014 Get Reel Video Challenge. Aimed at promoting careers in the apartment industry in Management, Leasing and Maintenance, videos should highlight a day in your work life and show what you love about your job and the industry. A panel of industry experts will judge all entries and choose the winner who will receive a trip to the NAA Education Conference in June in Denver! View more details on rules and how to enter on the NAA website.
2014 Goal: Earn Your IROP Designation
The Independent Rental Owner Professional (IROP) designation program is offered to the rental owner who manages their personally-held multifamily property or properties. The independent rental owner serves several roles in property management, public relations specialist, administrator, chief financial officer, marketing director and operations manager. Independent rental owners who take the IROP course will learn the many business practices of professional property managers and can now earn the IROP designation after completing the course of study and passing the online exam. With the help of other independent rental owners who devoted their time and expertise to this program, you will receive an "insider's view" of property ownership and management practices.
The Independent Rental Owner Professional (IROP) course will be offered as a webinar series from 1 - 4 p.m. ET on the following days:
Don't wait, register today.
NAAEI Designation Courses Offered Near You!
Apartment Association of Greater Omaha & Lincoln
March – April, 2014
Apartment Association of Greater Omaha & Lincoln
March – April, 2014
Columbus Apartment Association
January – February, 2014
Austin Apartment Association
February – March, 2014
Rental Housing Association of Boston
April – May, 2014
Chicagoland Apartment Association
May – June, 2014
Apartment Association of Southeast Texas
May – June, 2014
Chicagoland Apartment Association
Apartment and Office Building Association of Metropolitan Washington
Find more courses in your area on the NAA website.
For more information about any of the classes listed, please contact Kimberly McCrossen at 703/518-6141 ext. 121.
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