NAA Industry Insider: Guess What Happens to Rents in High Job Growth Areas?

August 12, 2014
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TimeWarnerCableApril14
Guess What Happens to Rents in High Job Growth Areas?
Digested From "Employment a Bigger Driver of Home Prices, Rents"
U.S. News & World Report (08/07/14) Peralta, Katherine

Trulia notes that employment growth is now playing an increasingly larger role in boosting rents in U.S. metro areas. Meanwhile, home prices are also on the rise in markets with above-average employment growth. The Trulia Price Monitor and the Trulia Rent Monitor show that home prices were 7.8 percent higher last month from July 2013, while rents climbed 6.1 percent on a year-over-year basis. The two monthly reports show how listed home prices and rents are trending nationally and locally in the 100 biggest U.S. metro markets. Job growth is widely viewed as a more sustainable driver of housing demand. Markets with higher list-price gains had faster job growth, the research shows. Cities that registered the biggest increases in home prices were Riverside-San Bernardino, Calif., and Birmingham, Ala. Those areas with the smallest gains were Albany, N.Y., and Little Rock, Ark. For rentals, the median rent for a two-bedroom apartment increased faster in higher-density areas with more job growth -- most notably San Francisco and Sacramento -- than in such "sprawling markets" as Birmingham and Milwaukee. Trulia chief economist Jed Kolko concludes, "What we've seen most recently is job growth has been faster in those harder-hit markets than for the country overall. That's good news for their housing recovery."

Market Trend Insights


RealPageAug14
Where Rent Hikes Have Residents Singing the Blues
Digested From "Nashville Rent Increase Have Residents Singing the Blues"
Wall Street Journal (08/10/14) Dulaney, Chelsey

In the past few years, the cost of renting an apartment has been climbing in a number of midsize cities, squeezing residents who are paying a larger percentage of their income to rent. East Nashville, Tenn. has become popular with young people priced out of downtown Nashville, according to local real-estate agents. Metro areas including Nashville; Raleigh, N.C.; Louisville, Ky.; Columbus, Ohio; and St. Louis were among the 10 regions with the strongest rent growth in the second quarter of this year compared with the previous quarter, according to the latest Reis Inc. research. Economists say apartment owners and managers in these southern and Midwestern cities are able to pass through large rent increases because of strong demand. "Job growth has picked up, unemployment's declined. There's still solid demand created by . . . people losing single-family homes and going into rentals," says Mark Zandi, chief economist at Moody's Analytics. "That's giving landlords the upper hand."

Two Factors Contributing to Sonoma's High Rents
Digested From "Rents Soar in Sonoma County"
Santa Rosa Press Democrat (California) (08/10/14) Digitale, Robert

Demand has grown so strong for apartments in California's Sonoma County that one owner and operator -- Pine Creek Properties -- stopped putting rental ads on Craigslist earlier this year. "We are looking at being 99.9 percent full at any given time," explains Patty Goodwin, CFO for the Santa Rosa-based property management firm. "The units are renting pretty much the day we're getting a 30-day notice" from a departing resident. Two factors are commonly cited to explain the trend: robust job growth in the Bay Area and a lack of new housing throughout the county. Due to the high demand, the county recorded some of the fastest rent gains in the country this year. The average apartment rent climbed to $1,521 a month in Sonoma County in the second quarter -- a 13.3 percent increase from a year ago, according to Real Answers. The rate of the county's increase was indeed the greatest of 23 metropolitan areas throughout the Golden State that Real Answers studies and higher than all 29 of the other metro areas the company reviewed nationwide. Similarly, Axiometrics reported earlier this spring that Sonoma County tied for fifth among U.S. communities with the fastest yearly rent hikes. The four other areas with faster rate gains were Odessa, Texas; Napa; and Honolulu. As mentioned earlier, few new houses and apartments have been completed in Sonoma County since the housing boom went bust almost seven years ago. From 2004 to 2007, the county added approximately 1,100 market-rate apartments, states Real Answers spokesman Nick Grotjahn. Since that time span, just 71 units have been erected.

Three Reasons for Charleston's Soaring Rents
Digested From "Area Renters Lament Rising Rental Rates in Charleston Region"
Charleston Post and Courier (08/10/14) Richardson, Tyrone

Apartment rents are increasing faster in the Charleston, S.C., metro areathan in many other parts of the country. Elaine Worzala, director of the Carter Real Estate Center at the College of Charleston School of Business, reasons that rents are on the way up because of two factors: higher demand coupled with the influx of higher-paying employment opportunities. A lack of new product is another reason. Many new apartment developments were shelved during and after the recession. Construction activity in recent months has been picking up in the region. Experts are forecasting more conservative rent hikes as a result, which would be welcome news for apartment hunters in and around Charleston. Reis Inc. recently ranked the 5.9 percent quarterly rent increase in Charleston as the fourth highest in the United States, based on what apartment owners and managers were asking from June of last year through this June. That is compared to a 3.2 percent average increase for all 79 metro areas Reis researchers included in their study. The average asking rents in the metro Charleston climbed 0.8 percent to an average $847 per month between the end of the first quarter and June 30, mirroring the 0.8 U.S. average. Worzala remarks, "When you bring in higher-paying jobs, that is great, but it can have a huge effect, and that can change the marketplace pricing." She said the strain on supply is exacerbated by some retirees and other empty-nesters opting to rent housing instead of buying. In terms of new units being added to the market, ApartmentGuide.com recently projected the Charleston area's apartment construction would increase 8 percent from 2013, which would be the highest growth rate in the U.S.

Food Is Following Apartment Residents in the D.C. Area
Digested From "New Apartment Developments Are Drawing Grocery Stores, Restaurants and Gyms"
Washington Post (08/10/14) Vaisman, Ethan

The Washington, D.C., metro area is awash in apartment and office construction. As a result, retailers are seeking out new locations and targeting the ground-floor store-front space included in many of these new developments. Their hope is that they can make inroads into desirable, rapidly growing neighborhoods and tap into the natural customer base that has grown out of D.C.'s increasingly "live-work-play" lifestyles. Since 2013, retailers have leased nearly 800,000 square feet of new space in apartment and office developments throughout the region. For the most part, that leasing activity has been concentrated around the city's Navy Yard/Ballpark area and the bustling U Street corridor. Now, more and more areas and neighborhoods around the Capital Beltway are registering activity. Grocery stores appear to be making the biggest splash, opening locations in recently built or underway projects. Since last year, grocers have signed for nine total spaces containing more than 460,000 square feet in apartment communities and office buildings either recently completed or currently under construction.

Prior to the current wave of development, big-block space was hard to come by in many urban neighborhoods due to the size or type of the buildings. However, the new construction taking their place has been specifically designed to offer the necessary square footage for such tenants. Fitness stores are also rushing in to the niche, hoping to cater to a demographic that is younger and maintains an active lifestyle. Yoga studios and other alternative workout facilities have also proliferated, as have many locally owned eateries and national restaurant chains. Analyts warn that if this momentum should slow, the greater retail market could feel a ripple of rising vacancy rates and slower rent growth because of increased competition among building owners to secure occupants.

Why the Sun Shines on SW Florida's Apartment Sector
Digested From "Apartment Demand Is Sky High, Supply Low"
News-Press (FL) (08/10/14) Hogan, Dick

With a 96.2 percent occupancy rate, Southwest Florida's apartment sector is one of the tightest in the country, and more and more residents are looking to lease units. Three new communities are in various stages of development and thousands more rental units are in the planning stages as more developers see opportunity in the region. Jack McCabe, a Deerfield Beach-based real estate consultant who tracks housing markets in Southwest Florida, remarks, "We're in this paradigm shift right now. In 2007, it was 70 percent buyers and 30 percent renters. Now, it's 60 percent buyers and 40 percent renters." He credits the growing number of "renters with no choice" -- i.e. those who had a short sale, got behind on their mortgage, or had a foreclosure -- for the reversal. Consequently, both developers and buyers of apartments are stepping up their game. Since the first of the year, Tampa-based Blue Rock Partners LLC has purchased three apartment communities in Lee County for $44.3 million. David Cobb, regional director in the Naples-Fort Myers area for Metrostudy, notes that another clue to apartments' current popularity is that a lot of new arrivals are prime candidates to rent. He states, "Southwest Florida's been creating 15,000 jobs a year, most of those service jobs. They're not the sort of people who are going to be able to afford to live in a master-planned single-family community." Some, though, are concerned that the apartment boom could turn to bust if a glut of new rental units comes on the market? To this end, timing will be crucial. McCabe concludes, "I think there's going to be probably two and a half years more of this good marketplace. Then in 2017, I think there'll be a downturn. Buildings that are completed before then will be OK."

Pittsburgh Apartments Steel Themselves for Modest Rent Growth
Digested From "Pittsburgh Apartments Are in Modest Rent Growth Mode"
Property Management Insider (08/07/14) Willett, Greg

Pittsburgh realized apartment rent growth during this year's second quarter, as effective rents for new leases rose 1.6 percent from April through June. However, annual rent growth has come in at mediocre levels for the last 18 months or so. Research shows that the annual rent growth figure as of mid-2014 was 1.1 percent for Pittsburgh, with the bump in pricing during the second quarter barely outweighing flat to declining rents during the three quarters before then. On the positive side, the current occupancy reading in Pittsburgh stands at 96.5 percent, well above the U.S. average. Furthermore, apartment occupancy in Pittsburgh has topped 95 percent since mid-2006. Analysts note that Pittsburgh's generally lackluster overall rent growth performance of late can be traced to basically flat rents in top-tier product. Owners and managers are not pushing rents in the most desirable existing apartment communities due to concerns that residents will opt for the new stock that is coming on stream. Over the last year, Steeltown has added just over 1,300 new rental units. While the corresponding 1 percent inventory expansion pace is fairly mild by U.S. standards, it is a more aggressive construction pace than is typical in the metro area. Another 1,000 or so apartments are in various stages of development, with delivery dates for most of those additions set for the fourth quarter of 2014. Looking at the other end of the product spectrum, Pittsburgh's Class C apartment communities are generating notably better annual rent growth that approaches the 3 percent mark. Finally, the general rent growth performance has been inconsistent in Class B offerings, coming in at solid levels one quarter and then dwindling to nothing the next.

Deals and Transactions


Lowes-14April
Detroit Joins Micro-Unit Development Wave
Digested From "Detroit Joins Micro-Unit Development Wave With 180 Units at Shapero Hall Building"
Commercial Property Executive (08/10/14) Grecu, Veronica

Detroit is the latest city to ride the micro-apartment wave. Locally-based Boydell Development Co. has obtained the necessary building permit to repurpose the long-vacant Shapero Hall building into a rental community with 180 micro-units that will range in size from 400 to 500 square feet. The apartments, which will rent for between $560 and $700 a month, are expected to meet the demand for smaller housing in the Motor City's central business district where the vacancy rate is at only 1.9 percent of the existing 10,551 apartments. With such major employers as Quicken Loans, the Detroit Medical Center, DTE Energy, Compuwave Corp., and Wayne State University (WSU) offering incentives for young professionals, these micro-units could just be the perfect choice for fresh graduates willing to relocate and get a job in Detroit. The adaptive reuse project is on pace for completion by the end of next year. The 180 micro-apartments will bring Boydell Development's residential real estate portfolio in Detroit to nearly 1,000 units.

10 Wichita Apartment Communities Sell to Two Groups
Digested From "10 Wichita Apartments Sell to Two Groups"
Wichita Eagle (KS) (08/07/14) Rengers, Carrie

A total of 10 Wichita apartment communities have recently changed hands involving two dealmakers. First, Oklahoma businessman Lew McGinnis has purchased a half-dozen properties in Kansas' largest market and now owns 12 total communities there. McGinnis has a history of buying and selling apartment communities in both Kansas and his home state. His latest purchases include the 240-unit Barclay Square Apartments and the 244-unit Rockborough Apartments. Separately, business partners Rupan Dev and Anm Doza have acquired four apartment communities for undisclosed sums. Acquisitions range from the 120-unit Elms Apartments to the 79-unit Northtown Square Apartments. Dev says he likes the potential multifamily housing has for cash flow down the road. Consequently, he and his partner are interested in buying additional apartments in the months to come. "Right now," he stated, "we're remodeling all our rooms" and adding such things as new carpet and windows. Exterior improvements include upgraded landscaping and new gutters.

Investors Get the Modern Message Loud and Clear
Digested From "Dallas-Based Modern Message Raises $200,000, Bringing Fundraising Total to $500,000 in a Year"
Dallas Morning News (08/07/14) Cho, Hanah

Dallas-based startup Modern Message has raised $200,000 in second-round capital, bringing its total fundraising to $500,000 for the year. The latest funding was led by Silicon Valley Growth Syndicate, a San Francisco-based fund that invests in early-stage tech firms with revenue. Modern Message provides a platform that helps turn apartment residents into advocates. The startup plans to use the latest funding not only to add staff, but also continue developing its core Community Rewards product. Modern Message co-founder and CEO John Hinckley states, "A good marketing strategy should allow residents to be the voice of the community. It's clear that Millennial renters place more importance on what their peers say online versus what [an] apartment says about itself. Providing a fun way to encourage apartment residents to share their influential experiences online is what Community Rewards does best."

What Features Will San Fran's Newest Apt. Tower Have?
Digested From "Equity Residential Developing 16-Story Apartment Tower in Bay Area"
Multi-Housing News (08/14) Loria, Keith

Equity Residential is in the process of developing Azure at Mission Bay, a 16-story apartment tower in San Francisco that will boast 273 rental units and feature three public parks on the sides of the property. "Mission Bay is one of the only master planned communities in San Francisco," reports Jim Kelly, Equity Residential's first vice president of development. "In terms of architecture, Azure at Mission Bay features a dual-height design that provides amazing 360 views yet integrates well with its surroundings, and enhances street-level activity with its two-door walk-up residences." The 396,200-square-foot development is located close to an ever-expanding base of creative and technology-driven businesses. When completed, the tower will offer 164 one-bedroom apartments and 109 two-bedroom units and include such on-site amenities as a business lounge, demonstration kitchen, fitness facility, bicycle repair room, a pet wash, and fire pit. Kell concludes, "It features stunning high-density design in one of the world’s highest-barrier to entry markets. We consider Azure at Mission Bay a forever asset."

Industry Buzz


BehrProAug.14
Free Swim Classes Make a Splash at Dallas Apartments
Digested From "YMCA Teaches Free Swim Classes at Apartment Pools"
NBC 5 Dallas-Fort Worth (08/07/14) Lee, Christine

YMCA is close to completing its summer of teaching basic pool safety at apartment swimming pools throughout the Dallas metropolitan area. The outreach program, dubbed Make a Splash, has provided free swim lessons at more than 130 mostly low-income apartment communities this summer. Jessican Pewitt, associate vice president of aquatics at YMCA, said children are often left unsupervised in apartment communities around swimming pools. She further cited research that drowning is the No. 1 cause of death for preschoolers. According to the Center for Disease Control and Prevention, up to 88 percent of drownings could be prevented if kids took formal swim lessons and learned basic pool skills. The Make a Splash program has been growing every summer since it was launched four summers ago.

Safety First! Apartments Buy Life Vests for Pool Use
Digested From "Mesa Apartment Complex Buys Life Vests for Pool Use"
Newszap (08/10/14)

In Arizona last week, the Mesa Fire and Medical Department kicked off Drowning Impact Awareness Month by teaming up with a couple of Mesa apartment communities for a new water safety program. U.S.-Coast-Guard-approved life vests have been bought in multiple sizes by the apartment communities' management staffs for their residents to borrow while in their respective swimming pool areas.

Student Loan Debt Is NOT Holding Millennials Back From Buying?
Digested From "How Student Loans Are Shaping Mortgage Approvals"
Wall Street Journal (08/05/14) Timiraos, Nick

Real-estate interests fret that today's astronomical amount of student debt will keep Millennials in rental situations and not buying homes. But data shows that mortgage applicants with student loans are not being rejected any more frequently than those without them. Of nearly 46,000 applications for home purchases that LoanDepot.com processed since 2010 for first-time home buyers, more than three quarters were approved and funded. The analysis also reveals, however, that even small changes in the size of an applicant’s monthly debt payments can influence whether financing is approved, with debt-to-income ratios above 43 percent creating greater risk of denial. LoanDepot data show that, so far this year, loan applications that were not funded reported almost $500 in monthly student loan payments versus about $300 in monthly payments on applications that were approved. "Between the approved universe and the denied universe, the [borrower's] credit is the same," explains LoanDepot CEO Anthony Hsieh. "The fundamental difference is a few hundred dollars in student loan debt that pushed the debt-to-income above the approved threshold."

Legal/Legislative Did You Know


2014 July Mission Banner
How to Put Apartment Fires Out Before They Even Start
Digested From "Apartment Managers Learn How to Guard Against Fire"
Augusta Chronicle (GA) (08/07/14) Johnson, Bianca Cain

For the second consecutive year, the Apartment Association of Greater Augusta has teamed up with the Augusta Fire Department to offer a fire-safety training course. The two-hour course has been well attended by apartment managers and maintenance technicians from all over the metro area. The class typically covers such topics as making sure items such as emergency exit signs and fire extinguishers are up to code to proper maintenance and testing of smoke alarms. Also discussed is basic fire-prevention safety, with warnings about such things as dryer lint, patio grills, and cooking with grease -- all common sources of flames.

Since Jan. 1, 2012, there have been 97 fires in multifamily housing communities across Georgia's Richmond County. The number is alarming not only because of the many families who have been affected, but also because of how fast fires between interconnected rental units can spread. A fire doubles in size every 30 seconds on average. Fire Department officials urge apartment owners and managers to consider upgrades to existing fire safety technology, asking course attendees to imagine their own family members living in their apartments. Jaime Morgan, an associate executive for the apartment association, concludes, "Preventative maintenance on apartment communities is a lot cheaper than having to redo after a fire."

NAA Announcements


DirecTVAug14
A Who’s Who of Asset Management Professionals Are Preparing to Teach You Everything They Know This October

The Maximize: 2014 Multifamily Asset Management Conference, Oct. 13-15 at the Omni Amelia Island Plantation Resort in Amelia Island, Fla., is destination No. 1 for any multifamily housing professional aspiring to achieve improved performance and yield more from their portfolio of assets.

Maximize co-producers NAA and Joshua Tree Conference Group are pleased to announce that speakers have been confirmed for this comprehensive retreat for professionals tasked with creating value for their companies and investors. Experts from a spectrum of disciplines, including Expense Management Strategies; Revenue Enhancement and Pricing Strategies; Data Analytics and Performance Benchmarking; Green Practices Including Utility Management; Capital Markets Financing Strategies; and Innovation, will be on hand to outline exactly how to extract total value and return from multifamily real estate assets and portfolios.

Register before Sept. 3 to save $100 and be part of the industry’s exclusive forum for connections, strategies, best practices and tactical innovations focused on accelerating real returns on real properties
The 2014 NAA Education Conference & Exposition: Success in Numbers—Big Data And Business Performance

How is success measured at your communities? Is it as simple as achieving budget? If you managed to achieve budget, could you have done better? Can you look at your data and understand how and where operations could be improved?

The session, “Using Big Data to Gauge Your Business Performance”—one of more than 50 offered in Denver during the 2014 NAA Education Conference & Exposition—featured a panel of leading data scientists and industry pioneers in business intelligence answering these very questions—illustrating how performance analytics and benchmarking systems can improve operating behaviors and achieve even better results.

Are you looking to understand how to benchmark your results against your competitors, identify the gaps between current performance and outperformance and use that data to drive financial results? You’re in luck: “Using Big Data to Gauge Your Business Performance,” as well as other unparalleled education sessions focused on operations such as “Show Me the Money: 10 Proven Ways to Increase Online Payments”—are now available to you as part of the NAA Education Institute’s (NAAEI) “REWIND” program, offering 20 video recorded sessions and 22 audio-synched PowerPoint sessions from the 2014 NAA Education Conference & Exposition. Order your sessions today!
Deadline Alert! 2015 NAA Student Housing Conference & Exposition Education Session Proposals Are Due Sept. 19

Convinced you have a fantastic session idea for the 2015 NAA Student Housing Conference & Exposition, Feb. 17-18 at the ARIA Resort in Las Vegas? Don’t keep it to yourself! Individuals interested in sharing their insight are encouraged to submit a proposal through NAA’s online platform by Friday, September19, 2014.

Presenters/Panelists should plan to conduct one-hour presentation, which should include audience engagement, with no more than three co-presenters/panelists (Please be sure to include at least one property manager; submission with suppliers only will not be considered.). Please note that the submission process and requirements have changed. Visit the “instructions for submitting” area on the online platform for further guidance.
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CAM:

Roanoke Valley Apartment Association
November, 2014

CAM Online

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South Dakota Multi-Housing Association
September – October, 2014

Apartment Association of Greater Omaha & Lincoln
September – November, 2014

Lubbock Apartment Association
October – December, 2014

Connecticut Apartment Association
October – December, 2014

Roanoke Valley Apartment Association
October – November, 2014

NALP:

Roanoke Valley Apartment Association
September, 2014

San Antonio Apartment Association
September, 2014

NALP Online

CAS:

Roanoke Valley Apartment Association
November, 2014

NAAEI Leadership Experience: Powered by Dale Carnegie:

Greater Cincinnati Northern Kentucky Apartment Association
October, 2014

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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NAA Releases 2014 Survey of Operating Income & Expenses

NAA Releases 2014 Survey of Operating Income & Expenses  

NAA President and CEO Doug Culkin shares highlights from this year's Survey of Operating Income & Expenses in Rental Apartment Communities. Check out the report today.

 

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