Features

Apartment Demand, New Leasing Stalls in Third Quarter, RealPage Reports

by Jeff Shaw October 25, 2022

RICHARDSON, TEXAS — Demand for apartments in 2021 and early 2022 was booming, with new renters filling apartments at record levels. In the third quarter, however, most markets experienced a “surprisingly big slowdown in leasing traffic,” according to RealPage, a data analytics and property software company based in Richardson. Negative demand means that in the third quarter of 2022, more tenants moved out than in. According to Realpage, this slowdown has caused a decrease in demand, with negative 82,095 units absorbed, bringing year-to-date net demand down to negative 47,143 units. This is during a time that is typically a seasonally strong leasing period. Effective asking rents fell to negative 0.2 percent month-over-month in September, the first time effective asking rents have fallen since December 2020. Apartment demand in the third quarter of 2022 registered as negative in 119 of the nation’s 150 largest metros. Most of these metros only saw mild decreases in demand, but a handful of markets did see notable decreases in apartment occupancy of up to 1.5 percent, including cities such as Phoenix and Las Vegas and some Florida markets, including Tampa, Fort Lauderdale, Orlando, Jacksonville and West Palm Beach. RealPage emphasizes that the U.S. apartment market …

October 25, 2022

Prep for Success: Site Civil Engineering Design Streamlines Construction, Avoids Snags

by Sarah Daniels October 25, 2022

Can you dig it? Possibly, but site civil engineers can help determine if construction can rock on without running into rocky situations. Thorough site civil due diligence is the foundation for developing a project with minimal delays. Keeping land development projects moving forward — especially during construction — requires highly informed due diligence processes and expertise when it comes to approvals and plans. Site civil engineering design with constructability in mind can support general contractors while streamlining the overall bidding and construction process. But what are best practices when it comes to ensuring a successful project? REBusinessOnline spoke to two experts who specialize in high-quality construction documents: Benjamin Plumb, P.E. project manager, and Keith Simpson, director of engineering, work for Bohler, a land development consulting and technical design company. You Never Know What You’ll Find Before You Dig — However, These Tips Can Help Uncertainty is part of any development project, but Simpson outlines two scenarios that make up the majority of the challenges he sees: 1. Existing underground utilities that are not reflected in plans. 2. Soils that differ from what was expected from the geotechnical report. In some cases, slowdowns are unavoidable and will cause delays, but due diligence can …

October 25, 2022

Affordable Housing Content Partner Development Features Loans Midwest Northeast Southeast Texas Walker & Dunlop Western

Shortage of Tax Credits, Higher Interest Rates Plague Affordable Housing

by Sarah Daniels October 20, 2022

Forty-year-high inflation rates that are outpacing wage growth and eating away at personal income are exacerbating already outsized resident demand for affordable housing financed by the federal Low-Income Housing Tax Credit (LIHTC) program. But it seems that obstacles to supplying new units to meet that demand are only multiplying. Those range from a shortage of housing tax credits needed to fund new supply to resistance to multifamily development at the local level. Meanwhile, higher mortgage rates are making home buying more difficult and expensive. In turn, that is creating more apartment renters, thereby putting upward pressure on rental rates. In September, for example, the average monthly rent price nationwide hit $1,759, an increase of 7.8 percent from the prior year, according to Realtor.com’s monthly rental report. That’s also nearly 25 percent higher than September 2019, the organization reports. What’s more, from 2015 through 2020 — long before mortgage rates spiked — the U.S. lost 4.7 million apartment units with rents less than $1,000 per month, according to U.S. Apartment Demand Through 2035, a report by the National Multifamily Housing Council and National Apartment Association. “Demand for affordable units is only going to become more acute between now and the end of …

October 20, 2022

Features

How Tenants Can Curb Effects of Inflation in Commercial Leases

by Taylor Williams October 19, 2022

By Jason Aster, managing director, KBA Lease Services Inflation hit 9.1 percent in June, the fastest pace of escalation in more than 40 years as measured by the Consumer Price Index (CPI), and hasn’t retreated much since then. And while businesses are factoring soaring prices into many decisions, they should make sure to keep a close eye on their leases. Most leases contain additional rent provisions designed to protect landlords from inflationary increases in operating costs over time. Accordingly, increases in operating costs will generally be passed on to tenants over the course of their lease terms. However, sharing the burden of inflationary increases should be fair to both tenants and landlords. During lease negotiations, tenants should try to protect their interests by pushing back on certain expense increases via a negotiated limit on how high costs can rise in a given year. Controllable or Not? A typical lease requires tenants to pay for certain operating expenses, many of which are affected by inflation. For some of them, such as taxes, insurance and utilities, there is not much landlords can do to control these costs, which are determined by municipalities, insurance companies and utility providers. Accordingly, both landlords and tenants …

October 19, 2022

Development Features Multifamily Multifamily & Affordable Housing Feature Archive

Commercial-to-Residential Building Conversions Help Fill Housing Shortage Nationally

by Jeff Shaw October 17, 2022

NEW YORK — The COVID-19 pandemic left many offices and commercial districts vacant, as employees worked from their homes and left cities to seek housing in more suburban areas. Simultaneously, hundreds of U.S. cities have been unable to meet housing demands for both homes to buy and homes to rent. Developers are eyeing adaptive reuse projects to address both issues. Adaptive reuse means repurposing an existing structure for a new use. Commercial-to-residential conversions are a form of adaptive reuse whereby office developments, retail spaces and hotel properties are converted into multifamily communities. Office conversions are the most common form of commercial-to-residential transformation. Forty-one percent of all rental apartment conversions in 2020 and 2021 involved former office buildings. Former factories and hotels are also common structures to be converted, according to RentCafe, a Yardi Systems apartment listing and management service, which also conducts research and publishes reports on local, state and national level multifamily dynamics. In 2020, developers completed 11,800 commercial -to-residential conversions — more than double the 5,271 units completed in 2010.The number nearly doubled again in 2021, when an approximate 20,122 units were slated for completion before the end of the year. The National Apartment Association (NAA) expects nearly 53,000 …

October 17, 2022

Features Multifamily Seniors Housing

Seniors Housing Occupancy Rate Rebounds to 82.2 Percent After Fifth Consecutive Quarterly Increase

by Jeff Shaw October 13, 2022

ANNAPOLIS, MD. — The national occupancy rate for private-pay seniors housing increased 100 basis points from 81.2 percent in the second quarter of 2022 to 82.2 percent in the third quarter, according to NIC MAP Vision. Occupancy is up 430 basis points from a pandemic low of 77.9 percent in the second quarter of 2021. NIC MAP Vision is a product of the National Investment Center for Seniors Housing & Care (NIC), an Annapolis-based nonprofit firm that tracks industry data gathered from 31 primary metropolitan markets. Private-pay seniors housing comprises independent living, assisted living and memory care. The occupancy increase — the fifth consecutive quarter of increase — is due to a surge in demand, which strongly outpaced growth in inventory. Further, the total number of occupied senior housing units within the primary markets is just 2,400 units shy of its pre-pandemic, all-time high level. Demand has rebounded more strongly for assisted living than independent living, with another quarter of robust gains pushing the number of occupied assisted living units to their highest level ever in the third quarter across the primary markets. Because new inventory was added during the pandemic, the overall assisted living occupancy rate has not yet …

October 13, 2022

Aaron Hargrove Walker Dunlop Affordable Housing

Affordable Housing Content Partner Features Leasing Activity Loans Midwest Multifamily Northeast Southeast Texas Walker & Dunlop Western

Walker & Dunlop: Affordable Housing’s Appeal Grows for Investors

by Sarah Daniels October 11, 2022

With transaction volume for market-rate housing beginning to ebb, affordable housing investment is poised to play a more central role in the months ahead. Several factors have broadened the allure of affordable housing as an investment vehicle in recent years. When the pandemic began taking a toll on market-rate housing performance, investors saw federal, state and even local governments enact measures to help residents at affordable communities maintain their rent payments and help ensure housing remained available for people struggling financially. We saw the interest level in Section 8 properties, for example, increase significantly during the pandemic, due chiefly to federal guarantees backing those rent streams. From a financing perspective, the strong commitment shown by Fannie Mae, Freddie Mac and the Federal Housing Administration to preserve liquidity for affordable housing has bolstered development and investment in the space. Due to the required hold periods, affordable housing investments are less affected by market cycles, so liquidity should remain strong. Now, changing economic forces promise to drive new equity to the affordable sphere and fuel further investment. The Federal Open Market Committee’s resolve to combat record inflation is exerting upward pressure on mortgage rates and, eventually, cap rates, which could discourage sellers …

October 11, 2022

Features Multifamily Student Housing

Conventional Multifamily Players Look to Acquire, Convert Off-Campus Student Housing Properties

by Katie Sloan October 7, 2022

Converting student housing properties to traditional multifamily has become a more noticeable trend as ever-compressing cap rates pressure conventional multifamily investors to seek higher yields. And as many markets seek more affordable and market-rate rental housing, converting non-performing student housing properties to conventional multifamily has become popular among a subset of traditional multifamily owners. Berkadia Senior Managing Director of Student Housing Kevin Larimer points to a National Multifamily Housing Council/National Apartment Association study released in July that supports why conversions are on the upswing. The study shows that the United States needs approximately 4.3 million new apartment units by 2035. The study also points to a deficit — underbuilding — of 600,000 units caused by the 2008 financial crisis. “Additionally, there has been a decline of 4.7 million affordable units between 2015 and 2020,” says Larimer, citing the study. “All of these factors have led conventional multifamily capital to look for creative ways to fill the supply gap. Conversion of student housing properties has been a very effective and efficient way.” Added Yield The draw to conversion developed as investors sought more yield in new acquisitions and flips. “This trend largely started due to the significantly compressed cap rates and …

October 7, 2022

Acquisitions Content Partner Development Features Loans Midwest Multifamily Northeast Southeast Texas Walker & Dunlop Western

Walker & Dunlop: Small Balance Lending Presents New Financing Option for Turbulent Market

by Sarah Daniels October 6, 2022

Following a similar move in June and July, the Fed implemented its third consecutive interest rate hike of 75 basis points in mid-September. This is the biggest three-month interest rate swing since 1994. What does this all mean for investors in the small balance lending (SBL) segment of the multifamily sector? The combination of rising interest rates, inflation and market uncertainty tempts borrowers to sit on the sidelines until conditions improve. Turbulent markets also limit financing options, as many lenders and capital sources tend to become cautious and pull back. But the need for capital transcends market cycles and seasoned multifamily investors know that rate hikes are nothing new. We’ve been here before with interest rates of nearly 7 percent in the 2000s and a record high of nearly 20 percent in the 1980s. The business of real estate investing never stops. New acquisition opportunities arise as distressed owners are forced to sell, cap rates settle to more conservative levels and the market shifts in the buyer’s favor. All things considered, now is the time to seek new investment opportunities. In fact, Warren Buffett once offered the timeless advice that it is wise for investors to be “fearful when others …

October 6, 2022

Features Multifamily

Battle Over Rent Control Continues in Localities Nationwide

by Jeff Shaw October 4, 2022

WASHINGTON, D.C. — In the face of economic insecurity, high living costs and inflation, some cities are considering implementing rent control measures. Municipalities in New York and California have taken steps toward enacting further rent control measures, while other states, such as Nevada, are shooting down these ideas entirely. Rent control measures are government regulations that place a limit on the amount a landlord can charge to lease a home or renew a lease. These regulations are intended to keep living costs affordable for renters, particularly for tenants earning lower incomes. Once signed by a governor or passed through referendum, rent control regulations are legal and binding. As of 2022, only five states — California, Maryland, New Jersey, New York, Oregon and Minnesota — and the District of Columbia have rent control laws in place. Thirty-one states have pre-emptions that prevent rent control policies, including Florida, whose state law bans local governments from controlling the price of rent except in certain cases. But according to the Washington, D.C.-based National Multifamily Housing Council (NMHC), several cities in Florida have nonetheless been working to place a rent control referendum on their November ballots. In both Tampa and St. Petersburg, city councils rejected these efforts, but …

October 4, 2022

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