NAA Industry Insider: What Is the Right Timing on Peak Apartment Completions? | National Apartment Association

NAA Industry Insider: What Is the Right Timing on Peak Apartment Completions?

August 19, 2014


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Top Story

What Is the Right Timing on Peak Apartment Completions?
Digested From "The Right Timing on Peak Apartment Completions"
Property Management Insider (08/14/14) Willett, Greg

Apartment communities scheduled to finish construction in the nation's 100 largest multifamily housing markets during the second half of 2014 total approximately 167,000 units, with targeted delivery timing split between the third and fourth quarters. While moving that much new product through initial lease-up all at once will prove challenging, there are reasons to be optimistic. The new supply is coming just as economic growth is accelerating from previously lackluster levels. Through July 2014, the Bureau of Labor Statistics shows that national job production has averaged 230,000 positions monthly during 2014 -- up 25 percent from an average of 184,000 jobs monthly between 2011 and 2013. Additionally, owners and operators of existing top-tier apartment communities have been proactive in fine-tuning their positions in advance of this new supply. Many operators have even juggled residency terms in the leases signed over the course of the past year to minimize expirations during the fourth quarter, when leasing activity hits its seasonal low.

Market Trend Insights

Why It's So Hard to Find Luxury Apartment Residents in Boston
Digested From "For Some Luxury Apartment Landlords, the Hunt for Renters Is Proving a Challenge"
Boston Business Journal (08/13/14) Grillo, Thomas

Competition among luxury apartment owners and managers in Boston is intensifying, with at least seven major communities now vying for residents. On average, the studio, and one-, and two-bedroom apartments in these developments are priced from $2,900 to more than $6,000 a month. One of the most prominent is The Kensington, the first of the luxury seven communities to launch last summer. Even though it was first to market, it has taken a year to fill 354 of its 381 units. It is a different story at Radian, where leasing commenced back in February and only 34 percent of the 240 units have been leased.

According to Radian property manager Michael Cheek, it took until the building officially opened in May when all the apartments and amenity spaces were completed for leasing to gain steam. He added, "Clients found it difficult to visualize what we were offering in terms of amenities and services until they saw Radian as a living, breathing entity. We have a great product, but we are in a very competitive marketplace." Carl Valeri, president and COO of The Hamilton Co., a Boston-based firm that manages more than 5,200 mid-priced apartments locally, said the market is definitely trending towards more affordable digs. He comments, "At most, it should take between six and nine months to lease a building. A year to lease up is outrageous. Either the product works or it doesn't."

The Tide Is Rising for Hawaii's Apartment Sector
Digested From "Hawaii's Market for Rental Apartment Buildings Remains Strong, Apartment Advisors Report Says"
Pacific Business News (08/11/14) Cresenzo, Bill

The number of apartment communities that sold during this year's April-through-June period in Hawaii rose 41 percent over the same period a year earlier, according to a quarterly market update by Apartment Advisors. Almost 20 apartment communities came on the market for sale during the three months ended June 30, sending the number of current listings up 50 percent to 42. The report stated: "The apartment market now appears to be bucking the trend compared to other property types where there continues to be a lack of inventory." The apartment communities that changed hands had an average asking price of $274,000 per unit and typically included a mix of one- and two-bedroom apartments. While the rental market remains strong, analysts note that it has not been able to keep up with the increase in apartment prices. As a result, investors are having to come up with more cash in order to meet loan requirements.

Apartment Vacancies, Rents Double Up in Twin Cities
Digested From "Metro Apartment Vacancies Stable, While Rents Rise"
Minneapolis Star Tribune (08/13/14) Buchta, Jim

A new Marquette Advisors study shows that nearly 2,000 new apartments have hit the market in Minnesota's Twin Cities since Jan. 1, and there have been plenty of residents to fill them. From April through June, the average vacancy rate in the 13-county region was 2.7 percent -- up only slightly from 2.6 percent in the first three months of the year and 2.3 percent a year ago. Because most of the new apartments this year have been expensive luxury units, the average rent climbed 2.6 percent to $1,004 a month. Across the Minneapolis-St. Paul metro area, developers have brought 1,979 new apartments to market in the first six months of 2013 versus 1,142 in the first and second quarters of a year ago. By the end of the year, Marquette researchers expect nearly 5,000 rental units to hit the market, well above the 2,763 full-year total for last year. Brent Wittenberg, vice president at Marquette Advisors, expects the average vacancy rate to climb to 3.5 percent by mid-2015. He states, "We are seeing a strong positive market response to new developments, both in Minneapolis and St. Paul, while suburban developments are also having success." The market was weakest in downtown St. Paul as of June 30. There, the average vacancy rate had jumped to 6.6 percent from 2.1 percent last year. All eyes remain trained on downtown Minneapolis, where 601 new apartments hit the market from January through June, lifting that area's average vacancy rate to 5.7 percent from 3 percent a year ago.

Deals and Transactions

Investors Snap Up $515 Million of S. Fla. Apartments
Digested From "Investors Snap Up $515 Million of South Florida Apartments in H1 of 2014"
World Property Channel (08/12/14)

A new report from CBRE South Florida Multifamily Investment Properties team shows that South Florida's apartment sector commanded a record number of sales in this year's first and second quarters. The study, which tracked sales in the $1 million to $20 million range, shows 172 total multifamily housing sales through June 30. Together, these transactions tallied more than $515 million -- the strongest sales activity for a first half of a year since 2006. Calum Weaver, a CBRE first vice president, comments, "The relatively low cost basis that we experienced in 2010 and 2011 is now a thing of the past. However, interest in multifamily properties is unabated. Investors recognize the strong market fundamentals for apartment buildings which has contributed to the uptick in sale activity." The CBRE report further showed that there were 9,558 net apartments absorbed in South Florida last year. In the previous four years, by contrast, the region averaged nearly 4,500 net absorbed units per year. According to analysts, the positive net absorption of units has helped drive down vacancies to all-time lows and rents to record highs.

Essex Acquires Two Communities for $208.8 Million
Digested From "Essex Announces Acquisition of Two Communities for $208.8 Million"
SYS-CON Media (08/15/14)

Essex Property Trust Inc. has acquired a couple of apartment communities for purchase prices totaling $208.8 million. The first acquisition is the Apex Apartments, a 366-unit community in Milpitas, Calif., was bought for $150 million. Amenities range from a saltwater pool and spa to an on-site fitness facility and an outdoor entertainment area with multiple fire pits and barbecues. Apex, which is located about one mile from North San Jose, is situated near a VTA Rail Station and the under-construction Milpitas BART station. The second purchase is the Avalon Bellevue Park Apartments, a 220-unit community in Washington state. It was purchased for $58.8 million. Essex Property Trust is an S&P 500 company that has ownership stakes in more than 240 apartment communities, with another 11 properties in various stages of development.

Apartment Investors Turn Up the Heat in Buffalo
Digested From "Investors Purchase 10 Apartment Buildings in Buffalo" (NY) (08/15/14) Lenihan,Emily

Real estate investors Aaron Siegel and Brett Fitzpatrick have acquired 10 apartment buildings in Buffalo's Allentown and west side neighborhoods. Siegel and Fitzpatrick are looking to create 295 apartments out of the deals. Using federal Affordable Housing Tax Credits and state Historic Tax Credits, the duo expect to spend $13.5 million on improving the buildings for a total cost of $42.4 million. Monthly rent at the 295 apartments will range from $750 to $1,275, depending on the size and location. The identity of the seller was not disclosed.

Industry Buzz

What Happens When Star Employees Don't Take Vacation?
Digested From "Some Companies Are Requiring Vacations, Paying Employees to Go"
Wall Street Journal (08/12/14) Shellenbarger, Sue

A March survey of 952 employees for the job and career site Glassdoor found that nearly 15 percent of U.S. employees who are entitled to paid vacation time have not used any of it in the last year. A heavy workload and fear of returning to a large backlog are two of the biggest reasons employees don't take all their vacation. Vacation resistors can cause problems for the entire workplace. They often they refuse to delegate duties, and they make colleagues feel guilty and even inadequate. Nevertheless, more and more companies are imposing mandatory-vacation policies for the health and wellbeing of their staffers. Some firms are even offering cash to finance employees' getaways. In 2012, for instance, FullContact started offering each of its workers $7,500 a year to help finance a nonworking vacation. This resulted in use of vacation time rising sharply. HubSpot, meanwhile, offers unlimited paid vacation time and mandates that employees take a minimum of two weeks off.

This Site Snitches on Those Who List Their Apts. on Airbnb
Digested From "This Website Snitches on Renters Who List Their Apartments on Airbnb"
Fast Company (08/15/14) Gayomali, Chris

Huntbnb is a new tool that makes it easy for apartment owners and managers to find out if one of their residents is listing their apartment on Airbnb, the room-renting company that recently overhauled its logo. Huntbnb only requires the user to type in an apartment community's address. Its algorithm creates a "geofence" that encircles the pinned location, which unearths all of the Airbnb properties listed within that radius. Those listings are further filtered out using the street name provided by the Airbnb lister. More and more owners are unhappy that their residents are making a profit and allowing in a revolving door of visitors.

Could Rooftop Apartments Transform Suburban Retail?
Digested From "Could Rooftop Apartments Transform Suburban Retail?"
Greater Greater Washington (08/15/14) Arnold, Ryan

Suburban retail areas are redeveloping into mixed use neighborhoods throughout the Washington, D.C., metro area. To this end, more and more retail strips are considering the addition of rooftop apartments. Given rising demand for mixed-use living, such apartments could provide scarce affordable housing to residents who want to walk to shopping areas. Some planners envision retail workers at the very stores that employ them being able to lease these units and live as close to work as humanly possible. Furthermore, nearly invisible apartments atop strip malls might conceivably face less opposition from surrounding communities than large new buildings. Of course, that is hard to predict.

There are clearly challenges to making an idea like this work. First, there is the structural challenge. Since the roof of existing big-box stores and strip shopping enters was not designed to support a second story, such buildings would likely need structural reinforcement. That is not likely to happen in, say, a functioning grocery store that is open to customers. However, it may be practical during renovations, for adaptive reuse, or in new construction. Second, there is the regulatory challenge. Many suburban retail strips are retail-only because that is what current zoning laws allow. Since it often takes years to obtain zoning approval for mixed-use, it's really often only worth developers' trouble for large developments. Finally, there is the developer challenge. A large majority of developers specialize in just one type of project. "It would likely take a special case for a suburban retail developer to take on apartments," according to the article's author, "or an apartment developer to build a big box. But people used to cite similar challenges as impediments to New Urbanism, and it's booming."

What Houston Company Is Expanding Into Multifamily?
Digested From "Houston-Based Real Estate Company to Expand Into Multifamily"
Houston Business Journal (08/12/14) Takahashi, Paul

Innovative Real Estate Cos. has announced plans to bolster its student housing operations and expand into the apartment sector. The Houston-based real estate company recently formed a joint venture with Sandlapper Capital Investments LLC that will enable it to harness the South Carolina firm's clients and investors to acquire, develop, and manage more student housing and apartment communities nationwide. "It's an opportunity to align ourselves with a reputable company to expand our footprint, states Jared Miller, Innovative Real Estate's president of multifamily operations. Innovative Real Estate currently manages more than a dozen off-campus student housing properties in six states. With the assistance of Sandlapper’s clientele and investors, Innovative Real Estate hopes to double its number of properties via acquisitions and eventually new development. Innovative Real Estate is in the process of transitioning toward becoming both a manager and developer. Currently, the company has one apartment development under construction in San Marcos, Texas, and wants to build more. Houston has been mentioned as a possible future target market. Miller concludes, "[Houston's] apartment market is absolutely on fire. Hopefully, there's something for us in Houston."

How Alarming Is This Smoke Detector Recall?
Digested From "Smoke Detectors Used in Apartment Buildings, Schools Recalled"
KPIX-TV 5 (CA) (08/15/14) Tata, Samantha

More than 141,000 smoke detectors sold in the United States and another 13,000 in Canada are being recalled because certain radio frequencies can interfere with the devices and render them useless in the event of a fire. Thirty-three models of the 400- and 500-series Edwards (ESL)-branded and Interlogix smoke detectors are affected. They are typically hardwired in security systems, professionally installed, and made to be used in apartment communities, college dormitories, hotels, and schools. The recalled detectors were made in China by Frynetics Ltd. To date, no injuries have been reported in connection with the recall.

Legal/Legislative Did You Know

Michigan Township Fans Flames With Apartment Grill Ban
Digested From "Ban on Grills at Apartment Complexes Approved After Fourth of July Fire"
Ann Arbor News (MI) (08/15/14) Perkins, Tom

Last week in Michigan, the Pittsfield Township Board of Trustees unanimously approved an ordinance banning grills -- propane or charcoal -- on balconies and decks at apartment communities. Matt Harsberger, the township’s public safety director, comments, "It's a fire safety issue, and especially in multifamily housing, we want people to be aware of what they're doing on their balconies." The ordinance applies to any buildings containing three or more residential units. All open burns at single or multifamily housing must be at least 10 feet away from any combustible materials. However, small, "camp-size" propane tanks are exempt. According to Harshberger, Pittsfield Township adopted the International Firefighters Code (IFC) guidelines in 2009 and added that code's language verbatim to the ordinance. The IFC exempts the small tanks, so the township followed suit. "All the other grills are prohibited for safety reasons," Harshberger concluded. In early July, as Pittsfield Township was considering revising its open burn ordinance that would ban grills on multifamily housing decks, a fire likely started by a propane grill on an apartment balcony heavily damaged the building.

Will Mobile Create Parking Requirements for Apts Near Campus?
Digested From "Will Mobile Create Specific Parking Requirements for Apartment Complexes Near Colleges, Universities?" (08/12/14) Sharp, John

Past concerns over a lack of parking spots in west Mobile, Ala., could result in some changes to the city's zoning ordinances regulating the number of parking spaces near colleges and universities. The changes are driven by Councilwoman Bess Rich, who wants to see a specialized zoning area for apartment housing or some sort of measure incorporated into the city's long-range planning process that regulates parking near the University of South Alabama, Spring Hill College, and so forth. The Mobile City Council recently voted to defer the issue until its Oct. 7 meeting. City staffers presented a change to its ordinance that would require more parking spaces at apartment communities throughout the city of Mobile. The proposed change would require one space per bedroom within an apartment unit, plus an additional 10 percent of the total amount of parking spaces within the apartment community. A six-unit apartment community with a mixture of one- to four-bedroom units needs, at a minimum, nine parking spaces. Under the proposed change, the same six-unit property with the same mixture of bedrooms could potentially be required to have a minimum of 15 parking spaces. Rich applauded Mayor Sandy Stimpson's administration for their willingness to study the issue more and potentially include it within a long-range planning process that the Mobile Planning Commission expects to undertake in the near future. "Mayor Stimpson expressed his interest in having 60 days for his administration to further study this matter," Rich concluded. "I look forward to hearing back from him and moving in the direction of having a code which handles the parking needs of student housing in our city."

City Cuts Oahu Multifamily Dwelling Trash Pickup
Digested From "City Cuts Oahu Multifamily Dwelling Trash Pickup"
Island Packet Online (08/11/14)

The last multifamily housing dwellings on Oahu that receive city trash pickup service will lose it in 2015, leaving some owners and managers scrambling to find money to pay private firms to haul their garbage away after decades of the city handling that for free. According to city Environmental Services Director Lori Kahikina, ending the service Jan. 31 is a matter of fairness. To be sure, the majority of apartment communities and condominium owners already pay private companies to remove their garbage. The latest change will affect about 100 multifamily communities and 80 schools, churches, and nonprofits. At press time, it was not certain how much it will save, as the city will no longer have to replace front-loader trucks or pay for repairs of the existing fleet that handled the multifamily dwellings.

NAA Announcements

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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. We strongly advise completing your hotel reservation today as rooms are expected to sell out. Please ask for the NAA group rate when making your reservation online or via phone at 800-THE-OMNI (800-843-6664).
The 2014 NAA Education Conference & Exposition: Navigating Disability Minefields

Fair housing liability is a moving target (especially when based on disability, the No. 1 fair housing issue in the U.S.), and if you don’t know the locations of the minefields, you’re bound to pay the price.

The session, “Navigating Through Disability Mine Fields”—one of more than 50 offered in Denver during the 2014 NAA Education Conference & Exposition—reinforced today’s operational challenges. Mines keep changing; new ones are being set out and old ones continue to resurface.

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When: October 8-9, 2014

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We're re-vamping NAAEI's NALP course and we want to hear from YOU! We're looking for specific, concrete stories about real-life experiences that have happened to you, including what happened, why and the result. These video clips will be incorporated into activities within the new NALP course. Prizes will be awarded for each valid submission with extra prizes if your submission is chosen to be part of the program

Learn more about the contest by contacting NAAEI's Shana Treger. Stay tuned!
NAAEI Designation Courses Offered Near You!


Roanoke Valley Apartment Association
November, 2014

CAM Online


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


Roanoke Valley Apartment Association
September, 2014

San Antonio Apartment Association
September, 2014

NALP Online


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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