Most of us have read articles or seen reports that suggest we are building too many apartment units in the Dallas/Fort Worth Metroplex. Thus, we potentially could have a surplus of multifamily units resulting in lower occupancies and stabilizing rents (sorry to all the apartment renters — don’t anticipate rents going down). Let’s review historical data and trends, then see if we are truly overbuilding. Over the past 22 years, an average of 29,542 single-family building permits were issued annually across the Dallas/Fort Worth area. However, the figure fell to 22,678 on average from 2011 to 2015. Thus, over the past five years there were 34,320 less single-family units delivered than what the market has historically absorbed. In comparison, multifamily permits (those of two or more units) have averaged 14,094 annually over the past 22 years, and 18,417 annually from 2011 to 2015. Over the past three years, 2013 through 2015, the average increased for both single-family (25,937) and multifamily (21,231). The combined average of 47,168 permits over the last three years is above the 22-year average of 43,636 permits. Multifamily permits have most likely increased as a result of a significant decrease in single-family permits. We have only recently …
It’s no longer a secret. Residential housing is one of the biggest stories to hit Cleveland’s central business district in over a quarter century. The only thing more impressive than the long list of residential projects that have been completed over the last five years is an even longer list of residential projects that are either planned or under construction. Despite this prolonged surge in activity, several questions remain, with most centered around the viability and sustainability of this sector. But before we take a look forward, let’s first take a look back. Downtown Cleveland has added approximately 1,700 new rental units over the past five years, with the total residential rental inventory standing at nearly 5,900 units. Last year alone saw 573 new units come on line as the direct result of converting nearly 500,000 square feet of former commercial and office space to residential. But despite this additional inventory, the occupancy rate has increased nearly 2 percent over the last five years, ending 2015 at 97.5 percent. Population surge in CBD The downtown area contains approximately 14,000 residents, a 79 percent increase since 2000, according to a newly released report from the Downtown Cleveland Alliance. The average rent …
Ten years ago, the urban Nashville multifamily inventory consisted of a small handful of institutional-sized assets, offering sparse amenities and unit finishes that left much to be desired. Fast forward to 2016 and the seemingly insatiable demand by residents to live in the eclectic, urban enclaves that Nashville offers has resulted in more than 5,000 units delivered over the last few years, with nearly 8,000 additional units set to deliver over the next two years. The standard of the assets being delivered continues to raise the bar, as developers look for a competitive edge and renters have demonstrated their willingness to pay a premium, with rents in top locations flirting with $3.00 per square foot. Demand The absorption pace has accelerated each year, seemingly limited only by the number of units being delivered to the market. When looking at the entire metro area, not just the urban submarkets, absorption topped 6,000 units in 2015, with new supply totaling approximately 5,960 units. A significant portion of this demand is from Millennials, who traditionally prefer to live in urban neighborhoods, and with Nashville ranked as a top 10 destination for Millennial in-migration, this trend is likely to continue. Fueling the urban residential …
With a three-year average occupancy of 96 percent, Omaha’s apartment market has displayed strong fundamentals that we expect to continue this year and beyond. Given the strong tailwinds created by Omaha’s healthy economy — the local unemployment rate stood at 3.6 percent in January compared with 4.9 percent nationally — it is not surprising that occupancy is high, rents and revenues are rising and new developments continue. According to the recently released IREM fall 2015 Omaha Metropolitan Area Apartment Survey, the year-end market occupancy rate was a strong 96 percent, with the lowest submarket at 94 percent and the highest at an outstanding 98 percent. On a 10-year historical basis, the Omaha market’s occupancy rate has ranged from a low of 92 percent in 2008 to a high of 96 percent in both 2013 and 2015. Any owner will tell you a solid two percent gain in occupancy over a multi-year period has a significant impact on net operating income. Both rents and revenues continue to grow within the Omaha market. Most owners have been raising rents between 2 and 4 percent a year, and in some cases 5 percent. The general expectation is that rents and revenues will both …
The Jacksonville multifamily market continues to enjoy strong fundamentals at levels not seen since before the recession. In fact, the last 18 to 24 months have seen a major record-setting environment. Jacksonville saw new records being set across the board from all asset classes in all submarkets. Class A and value-add assets continue to see cap rate compression and consequently we have new benchmarks for highest price per unit and price per square foot. In 2014, Jacksonville reached nearly $800 million in sales — accounting for more than 12,000 units (includes transactions exceeding $1 million). Based on the year-to-date transactional volume — $735 million with multiple large deals set to close by the end of the year — it’s safe to say that we will exceed last year’s amount. This is the highest sales volume for multifamily in Jacksonville in the last decade. The apartment market has experienced a steady improvement in fundamentals during the past 12 to 15 months. Effective rent increased 2.6 percent from $905 in the first quarter to $928 in the second quarter, which resulted in an annual growth rate of 5 percent. According to CBRE Econometric Advisors’ (CBRE EA) second quarter report, the forecast for …
We can expect to see a combination of new and familiar trends in the Milwaukee apartment sector in 2016 that will continue to attract investors to the local apartment market. What makes the start of 2016 different from 2015 is progress toward the normalization of monetary policy. In December, the Federal Reserve Board decided to raise the federal funds rate by a quarter percentage point, the first such increase in nearly a decade. The Federal Reserve Board’s widening may have an impact on the short-term rates, but the long-term interest rates that impact real estate values the most are influenced by the yields on the long-term U.S. Treasury bonds. We expect the long-term interest rates to stay low for the foreseeable future. When there is high demand for the Treasury bonds, the price of the bonds increase and the yields decrease, keeping long-term lending rates low. The two factors responsible for driving rates down in early 2016 are the high levels of volatility in stock markets around the globe and the drastic drop in oil prices. The volatility in the stock markets drives global capital to flow into the safe haven of bonds, and specifically the U.S. Treasury bonds, as …
Steadily rising home prices and a growing population base facilitated strong demand for apartments in Austin last year. A positive employment outlook and favorable demographic trends will continue to augment housing demand and attract investors to the Austin apartment market in 2016. In 2015, Austin employers added 34,600 workers to payrolls, expanding the workforce by 3.7 percent, according to the Bureau of Labor Statistics. Strong hiring last year contributed to a 40 basis point year-over-year decline in the metro’s unemployment rate, which reached 3.4 percent in the third quarter. The largest gains were in primary office-using sectors, which accounted for nearly 50 percent of additions. Austin will continue to grow this year, with more than 60,000 individuals anticipated to move to the metro, supporting the creation of 23,000 households. Employers are projected to add 37,500 new jobs this year, increasing the workforce by 3.9 percent, according to Marcus & Millichap Research Services. As was the case last year, demand for housing will intensify. Austin’s population and employment boom in 2015 led to surging demand for both single-family and rental housing. Ultimately, the consistent rate of growth for single-family home prices fostered higher demand for apartments as home prices in the …
Over the last year, metropolitan Washington, D.C.’s multifamily market has seen staggering amounts of new construction deliver, with net absorption levels that have surpassed all expectations. This is likely a result of similarly unexpected rates of job growth in the area and the remarkable resiliency of the metro D.C. economy as a whole. Among the major metropolitan markets around the country, metro D.C. — with the sense of permanence lent by the presence of the federal government — has historically been the most stable year to year, making it one of the safest bets for investors. Yet, given the massive amount of supply in the pipeline in recent years, the multifamily market has suffered a degree of hesitancy from investors fearing supply would outpace demand. However, this trend has reversed in the last 12 months, during which a record-setting 13,800 Class A multifamily units were absorbed. That figure jumps to 16,484 with Class B product in the mix. For all investment-grade apartments, stabilized vacancy has dropped 50 basis points to 3.7 percent. Class B units in particular have experienced excellent rent growth, rising 3 percent annually, while Class A maintains a growth rate of between 1 and 2 percent. Although …
There is a popular song from the HBO show Treme written and performed by Steve Earle titled “This City Won’t Wash Away”. Ten years ago the wind and water of Hurricane Katrina threatened to destroy almost a third of the multifamily market in metro New Orleans. After a decade of rebuilding, the multifamily market has emerged as one of the most dynamic and resilient markets in the country. For 10 straight years this world-class city has seen strong demand, increasing rents and stable occupancy. New Orleans is not only unique in its food, music and culture, but also its geography. The Crescent City is situated on the bend of the Mississippi River with Lake Pontchartrain to its north and wetlands to the east and west. The ability to increase inventory in Metro New Orleans is seriously impaired by a lack of land, as well as historic and demographic factors. Over the past 14 years the multifamily inventory in metro New Orleans has only increased by 10,500 units, an average of only 750 units per year. Included in that number is the rebuilding of existing inventory damaged by Hurricane Katrina. Fifty percent of the increase of inventory has been in downtown …
New Jersey and New York City employers have been expanding their ranks this year, allowing New Jersey residents to recognize new opportunities as economic growth in both areas continues to pick up steam. In Northern New Jersey, employment growth continues to follow a positive course as companies in New York City are attracted to the region’s lower operating costs and highly educated workforce. This year, companies are on track to add 29,000 employees, representing a year-over-year expansion of 1.4 percent. This will be the largest gain in jobs created since 2000. Job creation has been highest in the leisure and hospitality industry, as well as education and health services sectors, where 12,200 new jobs were created in the first half of the year. Newly employed professionals in search of affordable housing are opting for rentals in Northern New Jersey, where average rents can be half the cost of the greater New York City area. As a result of this growing demand for Northern New Jersey rentals, developers have expanded the pipeline of multifamily projects to more than 12,000 apartments with completions scheduled through 2017. Developers are on track to deliver over 7,900 apartments this year, representing the widest pipeline and …