NAA Industry Insider: Where and Why Are Apartment Rents Rising Steadily? | National Apartment Association

NAA Industry Insider: Where and Why Are Apartment Rents Rising Steadily?

 

October 7, 2014
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Where and Why Are Apartment Rents Rising Steadily?
Digested From "Apartment Rents Are Rising Steadily and Quickly"
Wall Street Journal (10/02/14) Whelan, Robbie

Reis Inc. reports that the pace of rent growth for U.S. apartments is accelerating despite an uptick in construction of new rental units. This comes as the economy steadily improves and vacancies remain stubbornly low. Rental rates rose 1 percent from July through September to an average of $1,111 a month nationwide -- a 3.3 percent increase from the third quarter of 2013. Apartment rents, which have now risen nationally for 23 quarters in a row, are 15.2 percent higher than they were at the official end of the recession in 2009. The figures suggest the five-year squeeze on renters shows little sign of easing, states Reis economist Ryan Severino. He forecasts that the pace of rent growth will continue to quicken for at least the next year to 18 months before moderating during the next few years, with a stubbornly low level of apartment vacancies being the biggest driver.

In total, developers added 46,055 new rental units to the nation's apartment supply in the three-month period ended Sept. 30 -- a 23.1 percent increase over the rate of construction a year earlier. Only 4.2 percent of apartments were vacant in the third quarter, down from 4.3 percent year over year. Reis research further shows that apartment costs are growing fastest on the West Coast, where rapid growth in the technology industry is fueling an uptick in demand throughout such markets as the Bay Area, Silicon Valley, and the Pacific Northwest. Going city by city, monthly rents in San Francisco grew fastest at a rate of 6.4 percent over the past year followed by San Jose (up 5.9 percent) and Seattle (up 5.7 percent). Annual rents also climbed in a number of cities in the South and Great Plains, most notably Nashville (4.9 percent), Charleston (4.7 percent), and Denver (also 4.7 percent). "We're not seeing people move out of our apartments to buy single-family homes at the rate they have in the past," concludes Equity Residential CEO David Neithercut. "We're seeing a very, very strong demographic picture of the Millennial generation and lots of demand for rentals in center cities."

Market Trend Insights


RealPage-Oct14
Are Dark Clouds on the Horizon for Charlotte Apartments?
Digested From "Charlotte Apartment Market Healthy for Now, but Vacancy Projected to Increase"
Charlotte Business Journal (10/03/14) Boye, Will

Reis Inc. reports that Charlotte's apartment sector remains healthy and continues to demonstrate solid rent growth. According to Reis researchers, the city's apartment vacancy rate as of Sept. 30 was 4.9 percent -- an increase from 4.8 percent a year ago. The effective rent growth was 1.4 percent during that time span, ranking 11th highest among the 79 markets that Reis tracks. Over 12 months, the effective rent growth in Charlotte was 3.4 percent. In a separate report released late last month, Real Data recorded a 5.3 percent vacancy rate in Charlotte from 5 percent a year earlier. Real Data further reported an average monthly rent of $919, rising 2.6 percent over the past six months from $874. The average vacancy rate could approach 8% in the next year, Real Data researchers forecast, as a wave of new apartment supply hits the market. There are currently 10,245 rental units under construction across the region and another 9,659 proposed.

Apartment Boom Playing Out in Longmont
Digested From "Apartment Boom Playing Out in Longmont"
Boulder Daily Camera (CO) (10/06/14) Wallace, Alicia

The northwest Denver metro region is in the midst of a multifamily housing boom. Nowhere is that more evident than in the suburb of Longmont. The city recently welcomed the 115-unit Roosevelt Park Apartments, the biggest apartment community to be added to the local stock since the 434-unit Grandview Meadows was approved more than a decade ago. On Longmont's eastern edge, the 220-unit Mill Village "resort"-style apartment community is also being developed by Pomainville and Wendell Pickett with a January completion date targeted. A favorable lending environment has helped to fuel the rise of new apartment complexes in Longmont and throughout Boulder and Broomfield counties. Colorado's population mushroomed more than 22 percent from 2000 to 2013, notes U.S. Census data, outpacing that of the country by nearly 12 percentage points.

Why Homebuilders Can't Find Workers
Digested From "It's Pretty Clear Why Homebuilders Can't Find Workers"
Business Insider (10/02/14) Palacios Jr., Rick

In the fourth quarter of 2008, oil and gas pipeline construction workers earned $0.46 per hour more than new home framing contractors. Today, by contrast, they earn $8.15 more an hour. So, it should come as little surprise that labor is tight in the new homes market, especially in Texas and Denver -- the closest major markets to the oil-boom state of North Dakota. Since 2008, framing contractor wages have decreased 8 percent, while oil and gas pipeline construction wages have swelled by 20 percent. Since the end of 2007, residential construction employment has plummeted by 743,000 jobs. That means that there are approximately 500,000 former construction workers not in the oil industry who need to be enticed to return to the residential construction market.

Which Way Are Wichita Apartment Vacancy Rates Headed?
Digested From "Wichita-Area Apartment Vacancy Rate Remains Flat From a Year Ago, Report Says"
Wichita Eagle (KS) (10/02/14) Siebenmark, Jerry

According to Reis Inc.'s latest research, the Wichita area ranks 30th out of 79 metropolitan areas in apartment vacancy rates nationwide. The New York-based real estate analysis firm notes that the metro area's apartment vacancy rate in the third quarter was 3.5 percent -- down almost 1 percent from the same three-month period a year earlier. Meanwhile, the average effective monthly rent in Wichita as of Sept. 30 was $543. That was a 2.6 percent increase from the third quarter of 2013. The New Haven, Conn., area posted the lowest third-quarter vacancy rate in the United States at 2.1 percent, while Memphis registered the highest at 8.5 percent.

Start Spreading the News ... Look Who's Interested in Downtown L.A.
Digested From "Downtown L.A. Real Estate Is Drawing N.Y. Investors' Interest"
Los Angeles Times (10/04/14) Vincent, Roger

Downtown Los Angeles is drawing newfound interest from New York-based firms, many of which are sinking large sums of money into the Southland's resurging commercial district. Buyers appear to be acquiring or developing all types of income-generating properties, from apartment communities to office buildings to warehouses. Analysts say downtown L.A. reminds New York investors of what their neighborhoods looked like prior to redevelopment sweeping through Manhattan and into the other boroughs. "Los Angeles has hit critical mass in downtown," remarks Greg Vilkin of New York-based real estate giant Related Cos. "Firms from New York show up and say, 'Wow, I see the potential I saw in Hell's Kitchen a decade ago. I watched TriBeCa, and the High Line, and I see what's going to happen." L.A. County has registered a 23 percent increase in the dollar volume of investment from the Empire State in 2014 versus a year ago, according to Cassidy Turley.

Could Falling Used Home Sales Be the Next Boon for Multifamily?
Digested From "Sales of Used Homes Seen Dropping This Year as Young Buyers Struggle, Investors Dry Up"
MarketWatch (09/29/14)

Economists expect sales of used homes in 2014 to fall below last year's final tally, as ongoing weakness from first-time buyers and fewer investors don’t help a market hit earlier this year by particularly poor weather, low inventory, and higher prices. The National Association of Realtors reported a slowdown in August in its monthly snapshot of existing-home sales, and said it expects 2014's sales to decline by 3 percent to 4.94 million from 5.09 million in 2013. A fast run-up in home prices has cut investors' returns and therefore their interest in buying, and made the market too pricey for younger buyers. Household formation rates are slow as some choose to double up households by moving in with relatives and friends. Economists say major factors behind this trend are slow real income growth as the jobs market improves in fits and starts and difficulty obtaining credit. However, many renters would like to own a home, a dream that could become a reality as the U.S. economy ramps up. "Don’t get fooled by the noise in the data, in either direction," Michelle Meyer, an economist at Bank of America Merrill Lynch, wrote in a recent research note. "We are not off to the races for housing, but the recovery has not been derailed either."

Deals and Transactions


Lowe's-Oct.14
DRA/Bell Partner to Sell 64 Apt. Communities to Lone Star
Digested From "DRA Advisors and Bell Partners Sell 64 Apartment Communities to Lone Star"
Insurance News Net (10/02/14)

DRA Advisors LLC and Bell Partners Inc. have sold a portfolio of 20,439 apartments in 64 communities nationwide for more than $1.8 billion. Lone Star Funds was the buyer. Bell Partners ranks as the 12th biggest multifamily management firm in the United States. It will continue to manage the 64 communities under Lone Star ownership. DRA Advisors President David Luski remarks, "This portfolio has generated strong cash yields and has benefitted from our active asset management approach throughout the hold period. The end result is a great deal for our clients, with returns well ahead of expectations." The 64 properties changing hands were originally part of a joint venture acquisition made by DRA/Bell six years ago of 86 apartment communities with 25,684 rental units. In the years following the original purchase, DRA/Bell sold 22 communities to other buyers with Lone Star ultimately buying the remaining 64 apartment communities in the portfolio. CBRE represented the sellers in this particular transaction.

Haley Buys Five Apartment Communities in How Many States?
Digested From "Haley Buys Five Apartment Properties for $64M"
Multi-Housing News (10/14) Stribling, Dees

Haley Real Estate Group has acquired five apartment communities for a total of $64.3 million. The new acquisitions are spread throughout three states and include: the Woodscape Apartments and Forest Lake Apartments in Newport News, Va.; the Fox Run Apartments in Broken Arrow, Okla.; Pryor Creek Apartments in Pryor, Okla.; and Meadow Walk Apartments in Arkansas City, Kan. Omaha-based Haley plans to invest at least $3.4 million for capital improvements to the various properties, which together boast 1,028 rental units. Their addition increases Haley Real Estate Group's portfolio to 46 apartment communities containing 11,380 rental units in 13 states.

Where Is Presidium Group Buying Two Apartment Communities?
Digested From "Presidium Group Gets $19.5M Loan for Acquisition of Two Dallas Apartment Properties"
Dallas Business Journal (10/02/14) Carlisle, Candace

Presidium Group confirms that it has received a $19.5 million bridge loan to purchase a Dallas-area apartment portfolio totaling 569 rental units in two communities -- the Vineyards at 4299 Pleasant Run Road in Irving and the Villa Jolla Apartments in Dallas. The two are expected to get a capital investment from the new owner of more than $5 million for interior and exterior upgrades. Presidium is expected to pursue long-term HUD financing through Greystone, a leading financial services and private investment group. Marty Lanigan, head of Greystone's portfolio lending group, observes that there has been an increasing number of property owners in Texas pursuing HUD financing.

Industry Buzz


PartnerSponsor-Sept.14
Six Things You and Your Residents Can Do to Survive a Fire
Digested From "Surviving a Home Fire: Six Things You and Your Residents Can Do"
Property Management Insider (10/02/14) Wolff, Ed

With October being Fire Safety Month and Oct. 5-11 marking Fire Prevention Week, building professionals offer a number of tips how apartment management staff and residents can prevent and/or survive fires. Being prepared is absolutely essential to helping ensure the safety of occupants. To this end, owners and operators should consider inviting a local fire official to help educate residents or host a party to discuss fire safety and escape planning tips. These tips include: one, installing and testing smoke detectors regularly; two, developing a fire escape plan; and three, impressing upon residents -- especially those with children -- the importance of knowing "stop, drop, and roll" should their clothes ever catch fire.

A fourth tip is assembling an emergency supply kit and having it on-site at all times. This kit should include everything from a flashlight and batteries to a whistle, blankets, and bottled water. Tip five entails gathering and maintaining a list of emergency contact numbers in cell phones that should also be kept in the supply kit. Finally, store all important documents in a secure place. Copies of each of these documents should also be made just in case.

Hoping the Bedbugs Don't Bite in Apartments
Digested From "Bedbug Problems Stable, but the Tiny Bloodsuckers Are Still Pests..."
Omaha World-Herald (10/04/14) Gaarder, Nancy

Apartment communities have emerged as the new trouble spot for bedbugs because the pests are harder to control in such settings as compared to hotels and individual homes. Multifamily housing generally has a good deal of clutter, which means more places for bugs to hide. Furthermore, individual residents do not have full control over their building. Another factor is apartment owners who may not be willing to treat buildings multiple times to effectively eradicate the bedbug menace. Still, bedbugs have been known to worm their way into all sorts of commercial settings, even offices. Ron Harrison, director of technical services for Orkin, notes that the pest has become established enough in the United States that it has made the move from hotels into homes, taking it a step closer to the places where people work. Alan Schrier, owner of ARS Pest Management of Omaha, assures that the occasional calls that he gets from corporate offices typically concern one or two bedbugs that have ridden into the office in a purse, briefcase, or clothing. Harrison said bedbugs have a harder time establishing a population in a corporate setting than in a residential one, because bedbugs thrive in cool, quiet, dark environments and prefer to feed at night. Cubicles and office schedules do not provide such an environment.

Why Are Condo Conversions Rebounding?
Digested From "Condo Conversions Return to Cities and For Investors"
Investor's Business Daily (10/03/14) P. A15 Gose, Joe

A decade ago, U.S. developers hoping to cash in on a homeownership boom that suddenly burst were scrambling to acquire apartment communities and convert the rental units into condominiums. Now, with demand for residential ownership rising in major markets where the emphasis for years has been on apartment construction, condo conversions are rebounding. Activity is emerging on the East Coast, in particular, where such developers as Magnum Real Estate Group and Related Cos. are targeting buildings for conversion in such markets as Boston, New York City, and the nation's capital. Furthermore, executives with apartment REITs AvalonBay Communities, Essex Property Trust, and UDR suggested during second-quarter earnings calls that such West Coast markets as San Francisco were on the brink of firing condo conversion activity back up as well. Condo conversions provide apartment developers with a potential exit strategy at the top of the market. Virginia-based AvalonBay, for instance, is developing a 503-unit luxury apartment tower in downtown Boston. However, it has indicated that it could opt to turn the units into condos, according to documents filed with the city. Converters generally expect a return of at least 20 percent on their investment, which includes the acquisition of the property along with improvements and administrative costs associated with the project.

Legal/Legislative Did You Know


MissionSponsor-Sept.14-use
W.Va. Developer to Make Apt. Communities Accessible to the Disabled
Digested From "W.Va. Developer to Make Apartment Complexes Accessible to the Disabled"
Associated Press (09/30/14)

Last week, the U.S. Justice Department confirmed that a West Virginia developer and his affiliates have agreed to make 30 apartment communities accessible to disabled people. The accord settles allegations of violations of the Fair Housing and Americans with Disabilities Acts. Douglas Pauley is general partner of 30 limited liability partnerships. Under terms of the settlement, the federal government said the defendants will spend approximately $1.7 million on the communities. Corrective actions range from replacing excessively sloped sidewalks to installing handicap-accessible curb ramps. Furthermore, the defendants have agreed to pay $100,000 as compensation to victims and a $10,000 fine.

NAA Announcements


It’s Officially Last Minute to Register for Maximize: 2014 Multifamily Asset Management Conference

Be a part of the rental housing revolution and join professionals dedicated to extracting total value and return from multifamily real estate assets and portfolios at the Maximize: 2014 Multifamily Asset Management Conference, Oct. 13-15 at the Omni Amelia Island Plantation Resort in Amelia Island, Fla.

Maximize: is destination No. 1 for any multifamily housing professional aspiring to achieve improved performance and yield more from their portfolio of assets. This comprehensive retreat features experts from Expense Management Strategies; Revenue Enhancement and Pricing Strategies; Data Analytics and Performance Benchmarking; Green Practices Including Utility Management; Capital Markets Financing Strategies; and Innovation. These subject matter experts will outline exactly how to create additional value for your companies and investors.

Register today 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.
Registration for the 2015 NAA Student Housing Conference & Exposition is set to open tomorrow, Oct. 8, 2014.

Don’t miss your chance to attend the 2015 NAA Student Housing Conference & Exposition, Feb. 17-18, 2015 at the Aria Resort in Las Vegas. Whether you want to hear from student housing experts offering real world guidance, increase efficiency and innovation in your community or make smarter decisions to drive success, this event is the answer. Find out how at the 2015 NAA Student Housing Conference & Exposition where we’ll have three inspiring general sessions, 14 tailored education sessions, and a chance for you to network with thousands of your peers. Register tomorrow and take advantage of the early registration rate.
Friday is Your Last Opportunity to Submit a Session Proposal for the 2015 NAA Education Conference & Exposition

Convinced you have a fantastic session idea for the 2015 NAA Education Conference & Exposition? Don’t keep it to yourself! The online Call for Presentations for the 2015 NAA Education Conference, June 24-27, 2015 in Las Vegas, is now open for education session submissions.

As the submission process and requirements have changed for the 2015 planning cycle, it is strongly encouraged to review the instructions for submitting prior to offering up your idea. The deadline to submit is Friday, Oct. 10, 2014.
NAA’s Survey of Operating Income & Expenses: Full Survey Report and Individual Market Data Available

Just in time for budget season, results of the 26th annual NAA Survey of Operating Income and Expenses in Rental Apartment Communities are now available.

Read the Executive Summary, and visit the NAA Income & Expenses Survey website on for a full survey report and individual market data.

The report presents data from garden and mid-rise/high-rise properties, and segmented by individually metered and master-metered utilities. Survey data is presented in three forms: Dollars per unit, dollars per square foot of rentable area and as a percentage of gross potential rent (GPR). The survey includes an executive summary, detailed data, reports and charts about rental communities. A total of 3,698 properties containing 966,296 units is represented in this year’s report. Data was reported for 3,366 market-rent properties containing 906,562 units and 332 subsidized properties containing 59,734 units. Data for the 2014 survey is based on data for fiscal year 2013. To order your copy of the survey, contact NAA’s David Edwards.
The 2014 NAA Education Conference & Exposition: High-Octane Employees Deliver Superior Results, But Where Are They?

As the multifamily housing industry continues to grow and become more specialized, the availability of well-trained talent has become a pressing issue. Management veterans are ready to retire and will likely take a wealth of knowledge with them when they depart. Meanwhile, the new generation of industry leaders is sometimes disconnected from what is most important to the various stakeholders in the rental housing industry.

“High-Octane Employees Deliver Superior Results, But Where Are They”—one of more than 50 sessions offered in Denver during the 2014 NAA Education Conference & Exposition. The presentation seeks to answer how to develop the next generation of leaders to take the helm of these companies and ensure the future success of our organizations.

Looking to define what constitutes success in property management and lay out a roadmap for developing future leaders? You’re in luck: “High-Octane Employees Deliver Superior Results, But Where Are They”— as well as other unparalleled education sessions focused on Professional Development such as “Emerging Leaders: Make Way at the Top”—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!
Become a Stronger Industry Advocate with These Advocacy Webinar

Why Some Citizen-Advocates (i.e. YOU) Are More Important Than Others
This webinar will discuss the committee structure, demonstrating the power of citizens represented by committee chairs, and provide strategies for advocates seeking to advance their agenda through relationships with their lawmakers.

2 p.m. ET Oct. 30. Register now.

Getting to Know New Legislators: How to Hug a Porcupine
Participants will learn who new federal and state legislators listen to, what congressional staffers believe are the most effective communications tactics for influencing undecided Congressmen, and how to conduct effective meetings and influence legislators at town hall meetings, and effective advocacy in the state/district.

2 p.m. ET Dec. 11. Register now.

Presenters will be Brad Fitch, President and CEO, and Susie Gorden, Vice President, Congressional Management Foundation (CMF); and Kathleen Gamble, NAA Director of Political Affairs. CMF is a nonpartisan nonprofit dedicated to helping Congress meet the evolving needs and expectations of an engaged and informed 21st century citizenry.
NAAEI Designation Courses Offered Near You!

CAM:

Roanoke Valley Apartment Association
November, 2014

El Paso Apartment Association
January, 2015

Greater Gulf Coast Apartment Association
January, 2015

CAM Online

CAMT:

Connecticut Apartment Association
October - December, 2014

Austin Apartment Association
January – February, 2015

San Antonio Apartment Association
January – February, 2015

El Paso Apartment Association
March, 2015

Rental Housing Association of Boston
April – May, 2015

Roanoke Valley Apartment Association
April – May, 2015

Chicagoland Apartment Association
July – August, 2015

Greater Charlotte Apartment Association
August – September, 2015

Greater Memphis Apartment Association
September – October, 2015

CAPS:

Chicagoland Apartment Association
February, 2015

NALP:


February, 2015

NALP Online

CAS:

Roanoke Valley Apartment Association
November, 2014

NAAEI Leadership Experience: Powered by Dale Carnegie:

Greater Cincinnati Northern Kentucky Apartment Association
October, 2014

Webinar Wednesday

The Path of Lease Resistance with Lisa Trosien
Oct. 8, 2014

15 Tips to Making Yourself Indispensible at Work with Alexandra Jackiw
Oct. 22, 2014

Outreach Marketing: It’s More Than Coupons! With Heather Blume
Nov. 5, 2014

Getting to “I Do” Again and Again. Keeping the Resident Romance Alive with Rebecca Rosario
Nov. 19, 2014

What Your Residents Won’t Tell You AND Your Mangers Don’t Know with Kiley Haught
Dec. 3, 2014

Your 2015 Marketing Playbook with Kate Good
Dec. 17, 2014

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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.
Did You Know?

NAA Turns 75! Yep, we made it: 75 years. Industry luminaries take a look at how far we've come and where we are heading. Learn more.
Upcoming Events

2014 Multifamily Asset Management Conference
October 13-15, 2014
Amelia Island Plantation Resort
Amelia Island, Fla.

2014 NAA Assembly of Delegates
Nov. 13-15, 2015
Intercontinental Boston

2015 NAA Capitol Conference
March 17-18, 2015
JW Marriott – Washington, D.C.



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