Los Angeles County is facing a significant lack of housing product — an issue that can’t be resolved any time soon. With the fight to limit new development, it is a very uphill and challenging battle that is unfortunate for the economy, business and, most of all, residents. An influx of about 160,000 new residents moved to the county from 2010 through 2015, but we have only seen upwards of 25,000 new housing units built during that same time frame. The demand drivers are extremely significant for new housing, but supply constraints like zoning and regulations are preventing an adequate supply. Additionally, with an unemployment rate currently at a historical low of about 4 percent, projections for housing demand over the next decade all point to a severe shortage in this growing region. Despite all the news about companies moving out of state to enjoy less expensive business costs as well as more affordable housing for their employees, this region, along with California as a whole, continues to see a population increase. Even with all this being said, the multifamily sector has and will continue to be the darling of the commercial real estate industry as it’s fueled by a …
For nearly a decade, multifamily financing has had the benefit of the most stable sources of long-term debt, which has kept the investment market strong and the property type in favor. Whether it is agency lending, life company permanent debt or commercial mortgage backed securities (CMBS) financing, there has been a consistent market for multifamily loans throughout the economic recovery. Houston has been the beneficiary of significant capital supporting multifamily investment and development during that time, but there has been some reaction to the slowing growth in the employment market due to the oil and gas commodity price pullback. Construction – New Development The moderate energy downturn in Houston, coupled with the significant new supply of units and softness in specific market segments, has begun to impact the market for multifamily construction loans and joint-venture equity capital. Construction lenders, which normally would be able to make construction loans with 25 percent or less equity, are now requiring up to 40 percent or more equity from developers. Construction loan advance rates have dropped to the 65 percent and below loan-to-cost (LTC) range. Banks have been under pressure to curtail their lending on construction loans and are sensitive to the pressure of …
While recently visiting a local Starbucks, I noticed an employee behind the counter with a tattoo in the shape of California. I decided to ask the barista if she was from the Golden State, and indeed she was. I asked what brought her to Des Moines, thinking she would say family or a love interest, but I was wrong. She had read and heard so much positive press about the Des Moines area that she decided to give it a shot. She started applying for jobs online and landed one with Wells Fargo, the largest employer in Des Moines. Working at Starbucks was her second gig. I asked if she lived in the suburbs. She replied, “Nope, I live downtown and work in the suburbs.” Population surge This anecdotal story is pretty common these days. Young people are flocking to Des Moines like never before. I have lived in Des Moines nearly 40 years, and never have I seen the growth we are currently experiencing. Much of it has to do with the quality of life. We don’t yet have a rush hour — we call it rush minutes. The cost of living is reasonable, and young people stand a …
Urban submarkets have largely carried the Birmingham multifamily market’s recovery. However, going forward investors will look to capitalize on greater yields in suburban submarkets. Despite rising rents, absorption continues to climb and concessions are falling off. Greater absorption metrics will be a recurring theme this year as rising construction costs and tightening access to capital constrain new development. Supportive Economy Birmingham’s economy added 8,000 net jobs year-over-year as of December 2016, growing at an accelerated rate of 1.6 percent. Further, unemployment remains low at 5.4 percent. Industries such as transportation, education, healthcare, government, and finance are at the forefront of job growth in the market, accounting for 75 percent of the net jobs added. Moody’s projects that the metro will add more than 24,000 net jobs through 2020, expanding by approximately 4.7 percent. Recent expansion announcements in the market reaffirm this trend, including the Project Sunrise deal that will create 746 manufacturing jobs via a $120 million investment in the former Meadowcraft facility. Another needle-moving deal is Mercedes-Benz U.S. International’s $1.3 billion plant expansion in Vance, which has resulted in automotive suppliers growing their footprint in the market. For instance, Eissmann Group Automotive recently added 200 jobs in nearby Pell …
In a major victory for subsidized housing developers and investors, the Wisconsin Supreme Court has reaffirmed longstanding principles governing the assessment of these properties. The Dec. 22, 2016 decision in Regency West Apartments LLC v. City of Racine confirms that the assessment of a subsidized housing project is a property-specific exercise that must take into account the type of federal program involved, specific restrictions on the property, and actual property income and expenses. The decision also affirms that the value of a subsidized property cannot be determined by comparison to conventional apartment properties that have no restrictions and can charge full market rents. Historical context The Wisconsin Supreme Court first upheld these principles in a 1993 case involving a Milwaukee apartment project subject to rental and other restrictions imposed by the U. S. Department of Housing and Urban Development (HUD). The assessor had valued the property based on market rents at conventional apartments, ignoring the property owner’s inability to legally charge market rents. The Supreme Court nullified the assessment, stating that the assessor had illegally assessed the property by “pretend[ing]” that the HUD restrictions did not apply. The new decision In the December 2016 decision, the Supreme Court reaffirmed the …
The New Mexico multifamily market, more specifically Albuquerque, recorded an impressively strong 2016 with vacancies dropping below 5 percent. Asking rents have increased for three consecutive years, fueling the investment market both in volume and prices. Employment grew by 2,700 jobs in Albuquerque last year. More than 2,000 of those were added in the fourth quarter, making it the strongest employment growth quarter in more than four years. Mining, logging and construction led the way in job creation, growing their sectors by nearly 8 percent. Professional, business services and the hospitality sector also strengthened on the job front. This expansion drove demand for multifamily units, pushing vacancy downward. The vacancy rate in Albuquerque declined 60 basis points in 2016, following a 100 basis point drop in 2015. Rents dropped slightly in the fourth quarter, but year-end 2016 asking rents were up 4 percent over 2015 to an average of $776 per month. Rent growth in the area has averaged 2.7 percent per year since 2014. Developers stepped up to the plate in 2016, answering the demand for more units. The market received 675 new units with about 1,000 more currently under construction. One of the new highly anticipated projects is …
To many people, Dallas and Fort Worth are one and the same. But to local Texans, they are two distinctly different cities in which to work, live and play. And to investors, the fundamental strategies are drastically different. Many consider Fort Worth to be the region’s cultural center and the “cooler” place to live. In terms of job growth, both cities are booming and are magnets for young, talented professionals. With this job growth comes a burgeoning multifamily market with future potential that is sure to remain strong. Here’s why. Job growth in the region continues to outpace the national average by more than 50 percent, and the Dallas-Fort Worth metropolitan area is ranked among the highest-growth metro territories in the country. More than 100,000 jobs have been added over the past year, thanks in large part to major corporate relocations and expansions. Toyota and Liberty Mutual are examples of two major companies committed to growth in the local market. In addition, over the next five years, the demographic of 20- to 34-year-olds is projected to increase by close to 100,000 people – one of fastest rates in the country. These millennials typically prefer to rent and are less likely …
LOS ANGELES — A joint venture between Alcion Ventures and Genton Property Group has received $239 million in financing to develop the Four Seasons Private Residences Los Angeles. Construction has already begun for the luxury project, which features 59 for-sale units. It is scheduled for completion in mid-2019. The Four Seasons Private Residences will be situated across from the Four Seasons Los Angeles at Beverly Hills, near the intersection of Third Street and Wetherly Drive. The property will be near Cedars-Sinai Hospital, Beverly Hills’ Golden Triangle and the North Robertson Boulevard shopping district. The 12-story, LEED-certified tower will feature custom residences with interiors inspired by California-modern designer Richard Neutra. Architecture firm CallisonRTKL designed the property. The units will offer a variety of floorplans with luxury features and amenities, including floor-to-ceiling, retractable glass walls, open-concept indoor/outdoor living and dining spaces, professional-grade gourmet kitchens, spa bathrooms with soaking tubs, separate glass-walled showers with dual-sinks, marble-topped vanities, rooftop gardens, and views from the Hollywood Hills to the downtown skyline. Property features include a heated outdoor lap pool and poolside cabanas, state-of-the-art fitness center with spin, cardio, weight equipment and private training and yoga rooms, private spa treatment rooms, an IMAX theater for private …
The Inland Empire multifamily market will retain its solid foundation of positivity this year as the economy again provides a healthy supply of new jobs and freshly formed households seek apartments to rent. The number of new multifamily units scheduled for delivery is a fraction of what it was last year, and this will place downward pressure on vacancy. Tightening vacancy will support another year of above-trend rent growth. Strong job growth in wholesale trade, government and transportation and warehousing positions has drawn many new employees to the Inland Empire in recent years. The number of 20- to 34-year-olds, who typically favor rental housing, has steadily increased. Growth in wholesale trade, government and warehousing will continue to attract Millennials in 2017, and the region’s employers are expected to add 27,500 new jobs overall. The Inland Empire’s employment boom has led to an increase in household formation, which has stimulated new multifamily construction. Developers fruitfully delivered 2,600 new units to the market in 2016. This exuberance, however, may well have been the peak for the current real estate cycle. This year, the projected number of apartment completions is just 500. This much more measured level of development will be quickly absorbed …
LOS ANGELES — Rescore Property Corp. has received a $100 million construction loan to develop The Rise Hollywood, a 368-unit apartment complex in Hollywood. The seven-story community will be located at 1331 N. Cahuenga Blvd. The units will feature nine-foot ceilings, wood flooring, stainless steel appliances, quartz countertops, balconies and walk-in closets. Community amenities include a pool, fitness center, yoga room, club room and dog run. The Rise Hollywood is situated near Amoeba Music, Lure Nightclub and the ArcLight Hollywood within the Hollywood Entertainment District. Kevin O’Grady, Daniel Sheehan and Eric McGlynn of Walker & Dunlop arranged the non-recourse construction loan. Bank of the Ozarks provided the capital. Boca Raton, Fla.-based Rescore is a private REIT founded by Arthur Falcone, Tony Avila, and Bill Powers. The firm partnered with Los Angeles-based Cal-Coast on this project. — Nellie Day