Effective Rents Continue Rise, but At Slower Rate than Past Two Years
Digested From "National Rent Growth Slows for Eighth Consecutive Quarter"
Axiometrics Inc. reports that the national annual effective rent growth rate slowed to 3.2 percent in the second quarter, down from 4 percent in the second quarter of 2012. Effective rent growth has slowed for eight consecutive quarters, though in 20 of the top 88 Metropolitan Statistical Areas, annual effective rent growth was greater than 4 percent. While national effective rent growth is decelerating, Axiometrics says it is still above the long-term average of 2.1 percent. Occupancy rose to 94.7 percent nationally, up from 94.3 percent a year ago, in response to increased new apartment supply. About 40,700 new apartments were delivered in the second quarter, up from 18,861 units in second quarter of 2012. Apartment deliveries totaled 124,500 over the last 12 months, and the pace of new deliveries is expected to rise to 185,348 units by the end of the year.
Market Trend Insights
What's Behind S.C. Region's Decline in Occupancy?
Digested From "Upstate Apartment Demand Expected to Remain Strong"
Greenville Online (07/04/13) Davis, Angelia
According to Real Data, the apartment occupancy rate for South Carolina's Greenville-Spartanburg-Anderson region is now 92.7 percent -- down slightly from the 93.2 percent seen in November 2012. However, the vacancy rate during the same period went up from 6.8 percent to 7.3 percent. The slight decline in the occupancy rate is likely due to the influx of new units that became available. Andrea Pevey, a multifamily market analyst at Real Data, said there were 532 new apartments added to the Upstate area recently. She furthern noted that apartment rents may drop to keep up with the region's improving housing market. Otherwise, Pevey concluded, "I don't foresee any real change anytime soon."
One Reason Why Seattle's New Apartments Have Not Cut Rents
Digested From "New Apartments in Seattle Area Don’t Halt Rise in Rents"
Seattle Times (07/01/13) Campbell, Colin
According to Apartment Insights, the construction boom of new apartments in the Seattle area has not pushed rents down in King and Snohomish counties for one reason -- low vacancies. Tom Cain of Apartment Insights said that prices have actually gone up with the relatively seamless absorption of more than 2,000 new apartments. Average monthly rent rose 3 percent to $1,190 over the last three months, the research shows. The vacancy rate is currently at 4.41 percent, down from 4.58 percent the previous quarter. Cain says recent employment growth has generated more apartment residents locally. In his report, Cain went on to state that the increase in rents should act as a buffer against a potential drop as more new units come onto the market.
Those Who Rent in Two Wash. Counties Are Staying Put. Why?
Digested From "Renters Not Looking to Buy Despite Increasing Rates"
MyNorthwest.com (07/02/2013) Shepard, Kim
Low mortgage rates, the increasing cost of rent, and a boom in apartment construction have lead analysts to predict that the vacancy rate in the Seattle area would go up this year. But the Seattle Times reports that the exact opposite is happening in King and Snohomish Counties. More than 2,000 new apartments have been added over the past year. Meanwhile, the average rent has gone up nearly 6 percent over that time span. Experts had expected to see more people leaving rental housing to become homeowners, but that simply is not happening. Job growth at Amazon, Microsoft, and Google are actually causing higher apartment demand in the region.
How Apartments Are Leading a Property Rebound in Jacksonsville
Digested From "Several Commercial Real Estate Sectors Rebound in Jacksonville"
Jacksonville Business Journal (FL) (07/05/13) Kritzer, Ashley Gurbal
Northeast Florida's commercial real estate market continues to show definite signs of an upswing. Multifamily housing continues to be the darling of Jacksonville's commercial real estate market. More than a dozen new apartment communities are now under construction locally. While the region's overall office vacancy rate is close to 23 percent, states CBRE Group Inc., the in-demand office parks around the mixed-use St. Johns Town Center have vacancy rates less than 10 percent. Meanwhile, supply is tightening up in the region's retail sector mainly because there has been very limited construction of new space.
Even the Apartment Rebound Is Big in Dallas-Ft. Worth
Digested From "North Texas Apartment Market Sees 'Renewed Pop'"
Dallas Business Journal (07/03/13) Carlisle, Candace
The Dallas-Fort Worth apartment market saw a rise in apartment occupancy during this year's second quarter, along with a jump in rental rates despite a surge in apartment construction. "We expected to see a strong performance in second quarter, but we were a little surprised by just how strong it was -- given the huge wave of new apartments under construction, plus the rebounding single-family sales market," said Jay Parsons, the national market analysis manager at MPF Research. The occupancy rate in the region grew half of a percentage point to 94.1 percent in the second quarter, according to MPF Research. Apartment communities were also able to command North Texas' second-largest rent hike in a decade of 1.8 percent, said Parsons. Construction of apartments in North Texas has exceeded historical norms with 24,697 units underway. "It'll be a challenge in the short-term to absorb so much new supply," he said. "We'll likely see occupancy rates and rent growth levels ease over the next year or two in the spots getting the most apartments."
What Virginia City Is Prepping for the Next Apartment Boom?
Digested From "No Letup in Downtown Apartment Boom"
Richmond Times-Dispatch (VA) (06/27/13) Hallman, Randy
Property professionals note that Richmond's downtown apartment boom has not let up. In fact, it's expected to continue in the second half of the year. At Venture Richmond's recent annual Downtown Development Forum, developer after developer spoke of recently completed or in-progress apartment communities citywide. Charles Macfarlane, managing member of Macfarlane Partners, said that there have been approximately 1,200 new rental apartments completed or nearly completed since mid-2012. Looking ahead, he estimates that there will be 2,400 new rental units added to the city's apartment stock over the next two years.
Deals and Transactions
Capri, Kennedy Wilson Buy LA Apartment-Marina for $225 Million
Digested From "Capri, Kennedy Wilson Buy LA Apartment-Marina for $225M"
Commercial Property Executive (07/01/13) Baltic, Scott
Chicago-based Capri Capital Partners LLC has teamed with Kennedy Wilson to buy the leasehold interest in Esprit, a 437-unit luxury apartment community in the Marina del Rey area of Los Angeles. The $225 million purchase, which Capri made on behalf of an institutional investor, also includes a 227-slip marina. The apartment vacancy rate in the Santa Monica/Marina del Rey submarket is currently around 3.5 percent, reports Marcus & Millichap. Although 1,150 units are now under construction there, the vacancy rate is not expected to rise substantially. The five-building, 18-acre Espirt community includes studio apartments and one-, two-, three- and four-bedroom rental units. All feature water views, washers and dryers, vaulted ceilings, and private patios. Kurt Zech, president of Kennedy Wilson Multifamily Management Group, comments, "Esprit is considered the finest multi-family mixed-use property in Marina del Rey, and an off-market transaction to acquire a property of this size and quality is very rare. The property was stabilized at 94 percent occupancy in late 2012 after a lengthy three year lease-up period and still has plenty of upside for rental growth in a steadily improving economy."
It Will Be a Day at the Beach for New Luxury Apartments in Mass.
Digested From "Luxury Apartments Planned at Beach"
Boston Globe (07/06/13) Rosenberg, Steven A.
Chicago-based Covington Realty Partners is set to break ground on a $37 million, 194-unit luxury apartment community at Revere Beach, Mass., this September. It will mark the first private development along a nine-acre strip of land where the city has estimated that up to $500 million in investments will occur over the next 10 years or so. Mayor Dan Rizzo remarks, "I think it's a catalyst that will bring a lot of future development." Since its founding, Covington has acquired more than $3 billion in real estate and has developed 16,000 residential units.
The Top Two Threats to the Apartment Sector
Digested From "Job Growth, Supply Top Concerns in Apartment Sector, Analyst Says"
REIT.com (07/05/13) Kenney, Allen
Green Street Advisors managing director Dave Bragg, who covers the multifamily housing sector, notes that the housing recovery is beginning to affect the apartment sector. According to Bragg, exit surveys show that the percentage of apartment residents who are moving out to buy homes is on the rise. However, he says that job growth and multifamily supply are still "the top two threats. Job growth and apartment rent growth have a very strong correlation over time. Second -- and what is generating a lot of attention today -- is multifamily supply, especially in formerly considered high-barrier markets." He added that his firm will be able to better quantify that particular risk over the course of 2013. Bragg concluded by offering his analysis on trends in the single-family rental market, which he described as becoming "institutionalized" from both a management and ownership perspective. This, in turn, has prompted apartment investors and operators to question the impact. "By our accounts," he stated, "it is actually quite modest."
What Factors Do New Programs Consider in Calculating Rents?
Digested From "Software Plays Growing Role in Calculating Apartment Rents"
Tampa Bay Business Journal (07/05/13) Holan, Mark
Similar to how airlines adjust their seat prices, more and more apartment owners are relying on computer software to maximize their rental rates. Sophisticated algorithms have been developed that calculate such market data as renewal percentages and competitor's rates. The programs typically look at what apartments a building owner has vacant today and which are becoming available in the weeks and months to come. Such factors as unit size, floor levels, and views are also figured into the prices, which typically change on a daily basis. John Selby, senior vice president at the multi-house group at CBRE in Tampa, remarks that such software "has been around for several years, but it has really gained popularity in the last two years." REITs and other institutional owners with big property portfolios and capital to buy the software have been leading the way. Selby concludes, "It allows them to prove to their stockholders they are doing everything possible to maximize revenue." Among the most popular of these programs are Rainmaker's "Lease Rent Options" and RealPage's YieldStar.
Report Asks: 'What Is the Current and Future State of U.S. Housing?'
Digested From "Deep Strength for Apartment Fundamentals"
National Real Estate Investor (07/03/13) Anderson, Bendix
Economic indicators show that overall apartment supply is in line with demand for rental housing, and that demand for apartments is likely to remain strong. This was a finding of the Joint Center for Housing's recent "The State of the Nation's Housing 2013" report, which also said that weak income growth will continue to put pressure on rental housing residents. The report noted that some apartment managers are concerned that the recent boom in multifamily construction -- last year, multifamily starts increased 37.7 percent -- will curtail this season of low apartment vacancies and high rental rates. Even more construction is expected. In 34 of the 100 largest metro areas, developers received more permits in 2012 to build apartments than the average rate during the 2000s. Overall, though, the high volume of new construction is simply making up for time lost during 2008 and 2009, when few permits were issued. And demand for apartments is strong enough to absorb the available rental units. The number of U.S. households increased by 980,000 last year, and the growing number of U.S. adults should support the creation of about 1.2 million new households a year for the rest of the decade, concludes the report.
Sun Shines on Seattle Apartment Building That's Gone Solar
Digested From "Low-Income Apartment Building in Downtown Seattle Goes Solar"
Puget Sound Business Journal (06/26/13) Stiles, Marc
Seattle developer Goodman Real Estate thinks that the newly installed solar system will be able to help heat a century-old apartment building in the city's Chinatown/International District. The solar thermal system is part of the hybrid heating system installed at the Addison on Fourth, which was formerly called the Downtowner Apartments and the New Richmond Hotel. Converted to low-income apartments in 1971, the building was purchased by Goodman last year for more than $12.5 million. The firm spent more than $400,000 on the system, which is expected to save the building $60,000 a year for heat. Net Zero Impact designed and installed the heating system. According to the company, federal tax credits, grants, and utility rebates will allow Goodman to recoup its investment within three years.
Legal/Legislative Did You Know
California Home Rental Bill Rekindles Old Debate
Digested From "Dan Walters: California Home Rental Bill Rekindles Old Debate"
Sacramento Bee (07/05/13) Walters, Dan
Rent control was among the hottest topics in California during the 1980s and 1990s as rents rose because of high demand and rising land and development costs. Years later, a developer planning a large rental community west of downtown Los Angeles became embroiled in a conflict with city officials over whether a certain number of those apartments had to be allocated for low-income residents with below-market rental rates -- a program known as "inclusionary zoning." The dispute wound up in the 2nd District Court of Appeal, which agreed with the city's contention that the low-income set-aside violated the Costa-Hawkins Act's restrictions on local rent control. Ever since, cities' powers to require rental communities to set aside apartments for low-income residents have been in doubt. The decision is the genesis of Assembly Bill 1229, which seeks to overturn the court's ruling and re-establish the legal right of cities to impose inclusionary zoning on private housing developments. A showdown vote now looms in the Senate, with low-income housing advocates and city officials lobbying on its behalf. On the opposition side, real estate groups say it would foster local conditions that could make rental housing development unfeasible. Proportionately, California currently has more residents who rent than every other state except for New York.
How Long Will Apartments Be on Hold in Jonesboro (Ark.)?
Digested From "Jonesboro Sets 6-Month Hold on New Apartment Complexes"
City leaders in Jonesboro, Ark., have approved a six-month moratorium on new apartment communities in the city. The Jonesboro City Council narrowly approved the moratorium last week by a 6-5 vote. Casting the deciding vote was Mayor Harold Perrin. The resolution -- a moratorium on new multifamily housing zones in the city -- is now set to expire Jan. 16. Supporters say the city already has a sizable amount of vacant land that is zoned for multifamily housing use.
Two Ways Apartment Bans Can Help Owners
Digested From "Change in the Air: Rental Smoking Bans"
Chicago Tribune (06/28/13) Umberger, Mary
More and more apartment owners are adopting nonsmoking policies. Such bans can help apartment owners and managers by, one, easing clean-up after residents move out; and two, lowering insurance expenses. The recent smoking ban adopted by Related Cos., which has 40,000 units in 17 states, is likely to be adopted by other apartment owners. However, more often than not, these bans are being pushed by municipalities.
Wis. Bill Would End Local Rental Registry, Inspections
Digested From "Bill Would End Local Rental Registry, Inspections"
Lacrosse Tribune (07/06/13) Bloom, Betsy
A bill making its way through Wisconsin's Legislature would eliminate La Crosse's rental registration and inspection programs, even as city officials consider further controls on apartment communities and other rental properties. Assembly Bill 183 passed last month by a 57-37 vote along party lines. A Senate version is now in committee. Lead sponsor state Rep. Duey Stroebel (R-Cedarburg) called the legislation a "continuing updating and reform of regulations" involving residential rentals. However, Stroebel has conceded that the bill, if passed, would end an owner registry that affects a property he owns in Milwaukee. La Crosse has had rental registrations for the past nine years as rental housing units make up over 50 percent of the city's residential property. According to Mayor Tim Kabat, the council will vote next week on a six-month moratorium on converting single-family homes to rentals. Kabat states that the rental registry better ensures the city knows who to contact if problems arise with a property. But Apartment Association of the La Crosse Area President Pam Strittmater counters that there are other, better ways to keep track of rental communities than a registry. She points out that the city currently has an overlap of inspections. She urges that apartment owners be free of having to pay unnecessary fees for "all of the extras that go along with a registry."
Have You Grown Your NOI Today?
Miami is the place to be for any multifamily professional seeking to improve their company’s bottom line. “NOI Everywhere” is the theme of this year’s Apartment Revenue Management (ARM) Conference®, September 23-25 at the Turnberry Isle Resort, an event that has radically expanded its scope of topics to include ancillary income, expense management, business intelligence and a whole slew of others.
There are user conferences for those wishing to learn how to use specific revenue management software. The ARM Conference® is something you won’t find elsewhere: best practices, benchmarking, networking and bringing ideas from outside the industry. To wit: Keynote speaker Greg Cross, Senior Vice President of Revenue Management for Hyatt Hotels Corporation, who will speak about current trends in lodging and their possible parallels in the rental housing industry.
And, if you register by August 14, you’ll save $100 on admission to the rental housing industry’s sole event dedicated to staying ahead of the ever-evolving operational curve.
Help NAA Celebrate Its Diamond Anniversary
The National Apartment Association is turning 75 next year, and would love for you to help us celebrate. In honor of our anniversary, we’re aiming to reach 7,500 fans on Facebook. Stop on by and give us a like; we’ll keep you posted on all the fun things we have cooking for 2014.
Be Kind, ‘Rewind’ Your 2013 NAA Education Conference & Exposition
Couldn’t attend the 2013 NAA Education Conference & Exposition in San Diego, or missed a great session? Don’t despair—you still can enjoy the best education sessions in the apartment industry, including video!
NAA’s Education Institute (NAAEI) is once again presenting its “Rewind” program, offering 21 recorded video sessions and 20 PowerPoint-synced audio sessions from the 2013 NAA Education Conference & Exposition—all for just $299!
Attention Suppliers: The Supplier Success Class Was Made For You
NAAEI will offer the course for apartment industry supplier partners, Supplier Success, as a series of 3 webinars.
The Supplier Success course is designed to offer an overview of the apartment industry and recommends ways that suppliers can maximize partnerships with apartment owners, apartment management companies and apartment association members.
The advantage of this live webinar format is that students can participate from wherever they are, even while traveling on business. Students also have the opportunity to ask questions, share experiences and learn not only from the instructors, but from each supplier partner taking the course.
The course is available via webinar series July 16, 18 and 23 from 2 p.m. to 4 p.m.
Registration Fee: $99 for members; $129 for non-members
Group pricing available for 10 students or more, contact Shana Treger. Each webinar will be recorded in the event you miss a class.
NAAEI Designation Courses Offered Near You!
Nevada State Apartment Association
Roanoke Valley Apartment Association
Chicagoland Apartment Association
July - August, 2013
Central Iowa Apartment Alliance
September - October, 2013
Hampton Roads Apartment Council
September – October, 2013
Greater Charlotte Apartment Association
October - November, 2013
Apartment Association of Greater Los Angeles
November - December, 2013
Nevada State Apartment Association
Roanoke Valley Apartment Association
Greater Charlotte Apartment Association
Roanoke Valley Apartment Association
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.
Abstract News © Copyright 2013 INFORMATION, INC.