New-Home Building Is Shifting to Apartments
Digested From "New-Home Building Is Shifting to Apartments"
Wall Street Journal (03/10/14) P. A1 Dougherty, Conor
Census data shows that the share of new homes being built as rental apartments is at the highest level in at least four decades. The shift toward apartment construction is the result of several trends, including tight mortgage credit and sluggish wage gains. In addition, many Americans continue to shoulder high student-debt loads, which has forced more young people who otherwise would have bought homes to rent instead. At the same time, the job market is showing signs of improvement. Consequently, larger numbers of young adults are leaving their parents' homes and forming their own households. This, in turn, is adding to the demand for rentals. Supply has not kept pace in a number of major job centers. In 2013, construction was started on slightly fewer than 1 million residential units. About 33 percent of those were rentals in a multifamily building, the highest share since data began compiled in the mid-1970s.
By contrast, single-family homes accounted for nearly 66 percent of housing starts last year -- a substantial decrease from their peak of 87 percent in 1993. Trulia chief economist Jed Kolko remarks, "Young people don't get a job one day and buy a home the next. The improving jobs picture for young adults will mean more renters this year, not a surge in first-time home buyers." The migration to apartments and condos is not limited to young people, either. More Baby Boomers are moving into retirement and seeing their proverbial nests empty, prompting many to downsize. Apartment building does not carry the same economic boost as the construction of single-family homes, however. Moody's Analytics estimates that four jobs are created for every new single-family home start compared to two for multifamily units -- an estimate that includes the many indirect jobs created by new construction such as home renovations and retail furniture sales. Multifamily units tend to be smaller and require fewer construction materials, along with fewer furnishings and smaller appliances.
Market Trend Insights
Three Reasons Why Downtown Hartford Needs More Apartments
Digested From "Tenants Welcome: Hartford, Suburbs Headed For Apartment Building Boom"
Hartford Courant (Connecticut) (03/09/14) Gosselin, Kenneth R.; Stagis, Julie
Downtown Hartford, Conn., is poised to add nearly 1,000 new apartments over the next few years, which is important for three reasons. More apartments would not only foster greater street activity in the evenings and on weekends, but also provide a key element to revitalizing the city. In addition, there is current a space crunch downtown with available rental units very hard to come by. A total of five apartment communities are now in various stages of planning and development. Four are conversions and one is brand new construction. The first of this wave of new rental units is expected to be ready by early fall. Work on an additional half-dozen apartment developments could commence in the next year or so. The new multifamily housing is intended to ease the crunch and provide more housing for an expected influx of thousands of state workers and more college students. Apartment developers are also banking on the national trends of people moving back to cities, Baby Boomers downsizing, and young people delaying home purchases. Downtown Hartford currently boasts around 1,500 apartments and a vacancy rate in the 3 percent to 4 percent range.
Apartment Vacancy Increases in Downtown Minneapolis
Digested From "Apartment Vacancy Increases in Downtown Mpls."
Twin Cities Business (03/14) Gilyard, Burt
Despite an ongoing building boom, the apartment vacancy rate across Minnesota's Twin Cities is holding steady. Marquette Advisors' latest "Apartment Trends" report shows the region's rental housing vacancy rate at 2.5 percent as of the first of this year -- a slight decrease from the 2.8 percent vacancy rate posted a year earlier. Analysts note that there are signs the vacancy rate is on the rise in downtown Minneapolis, which has been "ground zero" for many new luxury apartment developments. Late last year, Marquette Advisors registered a 4 percent apartment vacancy rate in downtown Minneapolis, up from 1.9 percent a year earlier. Some observers continue to express concern that the market is being overbuilt as new apartment communities continue to be addede. According to Marquette Advisors, the only two sections of the metro area that presently have higher vacancy rates than downtown Minneapolis are Hopkins (4.1 percent) and Woodbury (4.5 percent).
Indianapolis' Apartment Sector Speeds Its Way Into the Future
Digested From "Apartment Boom Underway in Indianapolis, Vacancy on the Rise"
Multi-Housing News (03/14) Pop, Adriana
Amid moderate job growth and rising home sales, the Indianapolis market is seeing a significant uptick in the number of new multifamily housing units this year. Marcus & Millichap research shows that apartment construction citywide is booming, particularly in the downtown area. Deliveries are expected to top a 14-year high in 2014, outpacing rental demand. Looking at downtown, a strong demand for apartments has resulted in the redevelopment of numerous iconic properties, most notably the former Bank One Operations Center. Milhaus Development is converting that building into 258 apartments. In addition, the same firm is repurposing the former Mitchell & Scott industrial site nearby into a 235-unit apartment community. In 2014 year alone, developers are slated to complete 3,900 rental apartments -- up from 2013's total of 2,600 completed rentals. Rents, meanwhile, are on pace to increase by 2.8 percent to an average of $761 per month after rising 3.6 percent last year. With regards to investment opportunities, a high demand for apartments in the Indianapolis metro area should attract more REIT and institutional investors.
Why Are Anchorage Residents Being Left Out in the Cold?
Digested From "Anchorage Doesn't Have Enough Homes to Meet Demand"
Anchorage Daily News (AK) (03/08/14) Kelly, Devin
Analysts lament that not enough houses and apartments are being built to meet current and future demand. Local business leaders, in particular, are cautioning that the trend threatens to hurt the local economy. An Anchorage household must earn $100,000 a year to afford an average-priced home and $50,000 annually to rent a two-bedroom apartment. HUD defines "affordable" as paying 30 percent or less of total household income for housing. Recent studies show that nearly 50 percent of those who rent in Anchorage pay 30 percent of their income in housing, while 20 percent pay half or more. According to data compiled by United Way of Anchorage, workers in 21 of the 25 most common jobs in Anchorage cannot currently afford a two-bedroom apartment. Meanwhile, workers in 18 of these jobs cannot afford a one-bedroom rental unit. The local rental housing stock is also deteriorating, with 10 percent built before 1960 and more than half built before 1980. Since 2007, the construction of new housing -- especially multifamily -- has slowed and presently falls well below the projected need. At the beginning of last year, for instance, analysts forecasted a need for 418 apartments. Only 72 had been added by the end of December. Locally, the construction of new multifamily rental communities has been chiefly taken on by the public sector and not-for-profit developers. Public funds, however, will not be enough to meet the production demands moving forward, and greater activity among private developers will be critical. Unfortunately, much of the easy-to-develop land in and around Anchorage is gone, and developers describe the permitting process in Anchorage as burdensome, time-consuming, and expensive.
Two Reasons Why Salt Lake City's Apts Underperformed in 2013
Digested From "Salt Lake City Apartment Market Underperforms on Lofty Expectations"
Property Management Insider (03/05/14) Parsons, Jay
Heading into last year, a healthy economy and sustained occupancy rates led to big expectations for rent growth in Salt Lake City. However, Utah's biggest market posted only moderate rent growth in 2013. Property professionals say this is due to two factors -- a strong preference in the market for single-family homes and a consistently flowing supply pipeline. Perhaps most disappointing was the fact that Salt Lake City measured average rent growth of just 2.7 percent last year. Nevertheless, job growth in the region remains strong, and apartment demand was solid at 95.3 percent as of the end of December.
Deals and Transactions
MetLife to Boost Apartment Investments in U.S. Cities
Digested From "MetLife to Boost Apartment Investments in U.S. Cities"
Investor's Business Daily (03/06/14)
With young professionals fueling demand, MetLife is looking to increase investment in apartment communities in such U.S. cities as New York and Los Angeles. Robert Merck, head of the MetLife Real Estate Investors unit, confirms, "The demographics look good going forward for multifamily." MetLife, which ranks as America's largest life insurer, is turning to real estate to support long-term obligations amid low bond yields and increase profit. Apartment demand is on the rise, with fewer Americans owning their residences more than six years after the housing bubble bursting contributed to the longest and deepest recession since the Great Depression. As of the end of 2013, MetLife held $40.9 billion of commercial mortgages -- an increase from $40.5 billion a year earlier. Roughly 50 percent was linked to office space, 23 percent to retail properties, and just 9 percent to apartment communities. The New York-based insurer's holdings of apartments rose 27 percent last year to $2.2 billion.
CoStar Group to Acquire Apartments.com
Digested From "CoStar Group to Acquire Apartments.com"
CoStar Group recently announced a definitive agreement to acquire Apartments.com, a division of Classified Ventures, for $585 million in cash. The deal, which received unanimous approval from the boards of directors of both CoStar and Classified Ventures, is expected to close in the second quarter of 2014. The sale includes the websites Apartments.com, RentalHomesPlus.com, and ApartmentHomeLiving.com, which together generated 114 million visits with an average of 7 million unique monthly visitors last year. CoStar plans to cross-pollinate its multifamily property database with more than 100 million visitors that showed interest in Apartments.com and its two sister sites last year.
What Are the Outcomes From Green Renovation of Low-Income Housing?
Digested From "Health and Housing Outcomes From Green Renovation of Low-Income Housing in Washington, D.C."
InsuranceNewsNet (03/01/14) Wilson, Jay
Green building systems continue to increase in prevalence. To date, though, recent studies are limited as to their associated health and housing outcomes. To remedy this, the article's authors measured self-reported resident physical and mental health, allergens, and building conditions at baseline and one-year follow-up, focusing on a low-income housing development in Washington, D.C., being renovated in accordance with green healthy housing improvements. Self-reported general health in adults improved from 59 percent to 67 percent, with statistically significant improvements in three areas -- water/ dampness problems, cockroaches and rodents, and reduced pesticide use. Median cockroach and mouse allergen dust loadings showed substantial reductions from baseline to three months post-intervention and were sustained at the one-year mark. Energy and water cost savings, meanwhile, were 16 percent and 54 percent, respectively. The conclusion is that incorporating Enterprise Green Communities and LEED standards in low-income housing renovation improves health and housing conditions and can go a long way towards reducing disparities. "All green housing standards should include health-related requirements," the authors write.
New L.A. Apt. Community Knows Not Everyone Gets a Charge
Digested From "Two Wildly Different Views of EV Charging at Condos, Apartment Buildings"
Autoblog (03/06/14) King, Danny
There is no such thing as truly free electricity. This rule applies particularly to recharging plug-in vehicles in multifamily housing settings, and it will become more of an issue as an increasing number of city-dwellers buy plug-ins. The company behind the new Elysian apartment community near downtown Los Angeles is taking steps to address the "problem." Developer Linear City is in the process of installing 20 fast charging stations in its new 96-unit community. Rent for the apartments costs between $1,500 and $6,500 a month, with a parking spot between $100 and $150 to the cost whether there is a charger there or not. Len Hill, a partner in Elysian, comments, "By making parking optional to the lease, we're broadcasting to residents that it might not make sense to even own a car." Additionally, there will be a car-sharing service located on-site.
1-2-3-4, O.C. Apartment Developers Declare an Amenity War
Digested From "Apartment Developers Declare 'Amenity War'"
Orange County Register (CA) (03/03/14) Collins, Jeff
Orange County, Calif., is currently undergoing an apartment building boom. At least 18 communities with a total of 8,800 rental units are planned for the county over the next three to four years. To offset high construction costs, more and more developers are building luxury apartments that offer the finest pampering that rent dollars can buy. "The amenity wars are in full swing," declared Bill Montgomery, president of multifamily acquisitions for developer Sares-Regis Group of Irvine. Such apartment communities are offering more entertainment and meeting areas, as well as large, commercial-level fitness facilities, Internet cafes, and resort-style pool and spa spaces. The Irvine Co. recently completed the Los Olivos project at the old Wild Rivers site in Irvine. The new apartment community includes a three-acre park, a walking trail, two Junior Olympic pools and a clubhouse.
Boston Leads Nation in Gentrification
Digested From "Boston Leads Nation in Gentrification"
Boston.com (03/05/2014) Van Voorhis, Scott
Gentrification projects are taking off in Boston more than anywhere else in the country, according to research from the Cleveland Fed. The share of Boston residents who live in formerly low-income communities that have been revitalized topped 25 percent as of 2007. Other markets where gentrification activity is high include the District of Columbia, with 19 percent of residents inhabiting such areas; and New York, Tampa, and Atlanta, each with 18 percent. The study concluded that, contrary to some opinions, gentrification is a financial plus for original residents. "From a financial perspective," the Cleveland Fed finds, "it is better to be a resident of a low-price neighborhood that is gentrifying than one that is not. This is true whether residents of the gentrifying neighborhood own homes or do not and whether or not they move out of the neighborhood. This is interesting because one might expect renters to be hurt more by gentrification, and one might also be concerned that people who moved out of the neighborhood did so because they were financially strained."
Legal/Legislative Did You Know
Conceal Carry Law Leaves Apartment Owners Without Much Ammo
Digested From "Conceal Carry Law Leaves Landlords Without Much Ammunition: Brown"
Chicago Sun-Times (03/02/14) Brown, Mark
Illinois' new conceal carry law is now in effect, allowing private property owners to prohibit handguns on their premises. However, apartment owners and managers in the Chicago metro area and elsewhere in the state are trying to figure out how to deal with the prospect of residents and visitors legally toting guns. Many are asking: "Can we ban guns entirely from our buildings or only in common areas such as rooftop sun decks and on-site laundry rooms?" Illinois is the last state to adopt a conceal carry law, but the particulars in this case make comparisons difficult. Lawyer Jessica Ryan says it will require litigation to resolve many of the issues raised by the new law, including whether apartment residents have the right to keep handguns in their rental units. Gun rights supporters have already taken the position that apartment owners and managers should not be permitted to prohibit those who rent from keeping a legal firearm for self-defense, the same as homeowners. Titan Security's vice president of operations Mark Kexel recommends that all apartment owners craft a detailed policy addressing this matter and inform residents in writing.
Darien (Ill.) Law Seeks to Deter Crime at Apartments
Digested From "Darien Law Seeks to Deter Crime at Apartment Buildings"
Chicago Tribune (03/07/14) Ruzich, Joseph
In Illinois, aldermen in the town of Darien recently gave the green light to a new ordinance that aims to deter criminal activity at local apartment communities. Aldermen approved the ordinance 5-2 at a March 3 city council meeting, requiring apartment owners to now buy an annual $10 license per rental unit. In addition, owners must share their contact information with the city and attend a "crime-free housing" seminar hosted by Darien's police department. Finally, apartment residents will be required to sign a "crime-free lease addendum," stating that they agree to not engage in any criminal wrongdoing. Any violations could result in lease termination. Darien Police Chief Ernest Brown remarks, "It is intended to preserve the quality of life in Darien. The ordinance will also bring accountability at every level and impact both [owners and residents]." Brown proposed the ordinance several years back after noticing a large number of police calls to area apartment communities. The calls ranged from the smell of marijuana in hallways to domestic violence issues. Opponents remain concerned that the ordinance could have a negative impact on the law-abiding people that make up the majority of this Chicago suburb's population. For instance, what if a single mother with three or four kids suddenly faces eviction if one of her older children commits a crime?
Redwood City Considers Watered-Down Sprinkler Retrofit Program
Digested From "Major Fires Raise Safety Concerns About Lack of Sprinklers"
KGO-TV (San Francisco) (03/03/14) Lee, Vic
A couple of major fires last year in Redwood City, Calif., apartment communities are raising safety concerns over the lack of sprinklers. Thousands of older Bay Area apartment buildings currently lack them, including the two that burned in 2013 and resulted in one death 25 injuries. The old buildings were grandfathered from a California state law that requires sprinkler systems for large apartment communities erected after 1989. U.S. Census data shows that apartments comprise 30 percent of the housing stock in the Bay Area. Building owners say retrofitting the older properties would be very expensive, costing between $8 and $15 a square foot on average. Janan New of the San Francisco Apartment Association remarks, "Life safety is paramount, but we thought that the same policy goals could be achieved by sophisticated smoke and carbon monoxide detectors." Redwood City, meanwhile, is considering a more moderate retrofitting program that was approved by the city of Los Angeles for older buildings. Dubbed the Dorothy Mae Ordinance, it would be more affordable to apartment owners and could be adopted by cities across the state. Redwood City Fire Marshal Jim Palisi remarks, "They put together a program that allowed them to look at every individual apartment building and think of ways to provide additional fire safety standards. For example, maybe have a sprinkler corridors, the exit corridors. Or maybe have a sprinkler head that's directly above a one bedroom apartment unit that's directly right by the front door."
Sessions from the 2014 NAA Student Housing Conference & Exposition Are Just a Few Clicks Away
Anyone worried about missing a minute of the top-level insight into the student housing business offered during the 2014 NAA Student Housing Conference & Exposition can rest assured now that it’s all just a couple clicks away thanks to NAAEI’s REWIND Program.
NAAEI invites you to enjoy actionable intelligence and turnkey solutions perfect for helping you achieve your personal and professional goals—and earn continuing education credits while you’re at it—with REWIND’s 11 PowerPoint-synced audio sessions from the 2014 NAA Student Housing Conference & Exposition.
Take advantage of thought-provoking sessions on critical student housing issues—from better understanding the next generation of residents to how gaining a firmer grasp on their technology can improve marketing and communications efforts, to name just a few—and make sure to stay tuned for more on the REWIND Program and other strategic takeaways from the 2014 NAA Student Housing Conference & Exposition.
2014 NAA Capitol Conference Is In Full Swing Today
Learn how to invest in your political capital and advocate to Congress by attending the 2014 NAA Capitol Conference and Lobby Day. You can save time and money on travel and lodging with this year’s customizable schedule: Attend only the Capitol Conference on March 11 and Lobby Day on March 12, or also attend the spring Board of Directors and committee meetings on March 9 and 10.
One Good Idea Could Earn You $5,000 at the 2014 NAA Education Conference & Exposition
In a first-of-its-kind NAA event, ABC hit reality TV show “Shark Tank” co-hosts Barbara Corcoran and Daymond John will judge live pitches from three innovative NAA attendees during the 2014 NAA Education Conference & Exposition, June 18-21 in Denver.
The Sharks will be headlining the Friday General Session from 9:45 a.m. to 11:15 a.m. Corcoran, who started her real estate business with a $1,000 loan and then built a $5 billion real estate empire in New York City, will share her personal advice, insights and anecdotes on creating a powerful brand. John, regarded as one of the most sought-after branding experts and keynote speakers in fashion and business today, will share his knowledge and business genius with NAA Conference attendees. Learn more about Corcoran and John.
But wait, there’s more: After Barbara and Daymond energize your entrepreneurial spirit, three lucky NAA attendees will come up on stage and pitch their idea or business concept to the Sharks—and compete to win $5,000—live during the General Session
Called “Sink or Swim: NAA Innovation Tank” contest, attendees wishing to enter are asked to shoot a five-minute (or less) video showing us your best idea for a product or a business, which of course is not limited to the world of multifamily housing. We won’t share your idea with anyone until you do on stage! Submissions must be received by 11:59pm EST on Friday May 2, 2014.
The Sharks will do what they do best: Critique and evaluate the pitches and then, along with the audience's help, will pick the lucky winner. For more information on how you can make your pitch to The Sharks, visit the NAA Education Conference website. Need inspiration? Have a look at NAA’s business idea.
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.
2013 Industry Benchmarking Data Available
The 2013 NAA Survey of Income & Expenses is now available. The survey provides some of the most valuable industry trend information.
The survey includes an executive summary, detailed market analysis, reports and charts about rental communities, as well as national economic analysis. A total of 4,500 properties containing over 1 million units from 45 U.S. states are represented in this year’s report. Data was reported from more than 4,100 market rent properties and 400 subsidized properties. To order, please visit the NAA Store, click on the link for Income & Expense Surveys.
Apply For NAAEI Leadership Experience Scholarships By March 14
NAAEI will be offering two new Leadership programs in April 2014. The NAAEI Leadership Experience: Powered by Dale Carnegie targets regional professionals and corporate department heads who are interested in learning how to lead effectively across generations, delegate tasks to develop and train others and most importantly, find time to work on future business growth. This course will be offered in Dallas, April 1-2 and in Baltimore, April 30-May 1. Learn more and register for this course. Scholarships are available. Deadline to apply has been extended to march 14.
The NAAEI Leadership NOW program: Powered by Gallup Consulting targets high-potential corporate executives. Participants will learn how to solve current business challenges by driving employee engagement. The NAAEI Leadership NOW program focuses on tactics for building engagement in a fast-paced work environment and is designed to introduce concepts, strategies, and tools that assist Leaders in building their leadership brand, maximizing strengths and unleashing the human potential within their
workplace. This course will be offered in Washington, D.C., April 8-10, 2014. Learn more and register for this course.
For more information on either of these leadership courses, please contact Kimberly McCrossen at 703-797-0610.
NAAEI Designation Courses Offered Near You!
Apartment Association of Greater Omaha & Lincoln
March – April, 2014
Connecticut Apartment Association
Apartment Association of Greater Omaha & Lincoln
March – April, 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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