It’s a trend that’s happening across the country. Millennials are fleeing the suburbs of their childhood and choosing to work and live in the urban areas of every major American city. But there’s a unique twist to this story in Kansas City. While Millennials are moving downtown in droves, many have a reverse commute. Most Fortune 500 companies have remained in the suburbs after their flight from downtown beginning in the 1970s. In addition, several large companies have jumped the state line due to favorable tax incentives. In the second quarter, the downtown office vacancy rate stood at an unhealthy 29.9 percent. Only one office submarket posted a higher vacancy rate. Meanwhile, the leading submarket, South Johnson County, recorded a 12.8 percent vacancy rate. It’s been difficult for older office buildings with smaller floor plates of 10,000 to 15,000 square feet to compete as companies look for larger floor plates of 25,000 to 30,000 square feet. Companies are also finding that surface parking in the suburbs is more economical. Building Conversion Wave The good news is that a slow reversal in both the multifamily and office markets is occurring as older and historic office buildings are adapting to the demands …
Multifamily
With a booming tourism industry driving economic expansion and a new owner/renter paradigm impacting apartment renter dynamics, Orlando is experiencing continued expansion in apartment development. Currently, development for more than 22 apartment communities totaling over 6,000 units is underway in just three hot submarkets. Demand has continued to keep up with this new supply, surging to a 10-year high in the second quarter of 2014, with market-wide occupancies topping 95 percent. Job Creation Metro Orlando is predicted to have an average annual growth rate of 4.1 percent from 2013 to 2020, putting it 13th for growth among American cities, according to a report from the U.S. Conference of Mayors. With an unemployment rate of 5.7 percent — well below both state and national unemployment averages — Orlando is outpacing much of the country in job creation and economic growth. Orlando’s $50 billion tourism industry has undeniably distinguished itself as the leader for growth in Central Florida, with the largest theme parks currently undergoing historic expansions. This will add thousands of jobs to Central Florida’s employment market over the next few years. For example, Disney World announced in early July that it is actively hiring for 1,000 new local jobs, and …
Las Vegas investors remain risk averse, favoring Class A and B properties. Increased buyer demand and a lack of inventory will support more aggressive pricing, with the sellers capitalizing on improving property performance. With stronger operations, Class C owners are encouraged to bring assets to market, pushing deal flow for the properties. The location of the asset is crucial to investors searching for higher returns, which is expected to exceed 8 percent. With an improving local economy, new construction, strengthening job market and a new “downtown,” we can expect a lower apartment vacancy and higher rents in Las Vegas this year. The improving local market and strengthen job market is being driven by some noteworthy construction and openings this year. They include the Linq, SLS Hotel (formerly Sahara Casino), the Downtown Summerlin Mall, the Grand Bazaar Shops, the Malaysia-based Genting Berhad’s $4-billion Resorts World Las Vegas (formerly Echelon) and the announcement of the $2.5-billion renovation of the Las Vegas Convention Center. These projects will create more than 15 million direct and indirect jobs. On top of this, occupancy rates keep rising. The Las Vegas market absorbed more than 3,000 units in 2013. It has absorbed another 760 net-leased units so …
Did Richmond get hip while you weren’t looking? If you missed all of the skinny jeans, slim-fit plaid, tattoos, beards and craft breweries, then you were not paying attention. Is there a correlation between the amount of breweries, luxury apartments and historic rehabs? Maybe, but something is happening here and it has little to do with Richmond’s former designation as the Capital of the Confederacy and more to do with a vibrant and diverse culture, native-brick buildings, the James River, Virginia Commonwealth University (VCU) and a great quality of life. Millennials are flocking here and Richmond has gotten cooler (i.e. better) every year, albeit somewhat slowly. In terms of apartments, there are several hotspots in the area that continue to be, or are becoming, destinations to live, work, shop and play, and multifamily developments are leading the way. Shockoe Bottom is booming, Manchester is coming to life, Scott’s Addition & Boulevard could become Richmond’s SOHO, Short Pump is moving into Goochland County and does not seem to be stopping anytime soon, and Chesterfield County, once you get around the cash proffers, continues to surprise. Richmond has just over 70,000 units and a very stable vacancy rate of 4.5 percent. Class …
When The New York Times has something positive to say about Birmingham, you know something really good is in the works — and that’s exactly what happened last August. The paper ran an article entitled “A Return to Downtown Birmingham” that highlighted Railroad Park, Regions Field, the new Westin Hotel and the renovation of Lyric Theatre. It quoted David Fleming, CEO of REV Birmingham, calling attention to the public enthusiasm that’s driving the revitalization. “There’s a feeling that [the downtown] is back, and that wasn’t true 10 years ago,” he said. This past March, Livability.com added to the buzz by ranking Birmingham 10th in the nation in its ranking of downtowns in small- and mid-sized cities. Developers Betting Big As a result, there’s a question that’s now on the minds of many apartment investors: Is the sky the limit for downtown Birmingham? It’s too early to tell, but an increasing number of developers are placing their bets on the Magic City. At the end of April, the Bristol Development Group announced plans to build 250 high-end apartments downtown, joining such local companies as Harbert Realty, Watts Realty, KRE Development Holdings, RGS Properties and Scott Bryant & Co. that have about …
Due to its unique location and an economy pretty well recovered from the recession, Honolulu has experienced explosive growth in high-rise condo developments. These are exciting times for investors and developers of multifamily properties on the islands. Hawaii’s economy is finally on a positive growth trend for 2014. This is expected to continue into 2015 and beyond. The state’s economy relies heavily on conditions in the U.S. economy and key international economies, particularly Japan, which has experienced slow growth. Tourism in Hawaii is the No. 1 industry. Last year, it grew 4.8 percent, which resulted in more than eight million annual visitors. This is expected to taper to 3 percent in 2014. U.S real GDP is expected to increase by 2.4 percent in 2014 and 3 percent in 2015. In comparison, Hawaii’s economy is projected to show a 2.4 percent increase in 2014 and 2.2 percent in 2015. Hawaii’s unemployment rate is projected to be 4.2 percent in 2014, 4 percent in 2015 and 3.5 percent in 2017. The Honolulu Consumer Price index is expected to increase to 2.1 percent in 2014 and 2.5 percent in 2015. These are all positive signs. However, Hawaii suffers from a critical shortage of …
Purpose-built student housing has always been a dynamic market segment with unique challenges and opportunities. As an asset class, student housing fared well during the recent downturn, but the micro-market nature of these developments precludes too many generalizations. What makes a university a strong market for new student housing is in large part due to the dynamics at work in that specific university community. In addition, student housing being developed today reveals a trend toward high-end finishes and lavish amenities. Hyper-local Market On a national scale, the student housing market is large and growing. As the recession drove more people back to college, developers began adding new beds to campus communities across the nation. The swelling ranks of college enrollment, even as the job market declined, is one reason student housing continued to provide strong returns in a weak economy. But within a university community, there is a finite market for off-campus housing. For example, if a university has 20,000 students, one-third may live on-campus and one-third may commute or live in conventional housing. The other third — 6,500 students — in the market for off-campus housing likely represents the total market. If there were already 5,000 beds available, the …
As the first quarter of 2014 comes to a close, the biggest question mark facing the Charlotte market is whether or not it can handle the historically high supply levels. Despite nearly 3,500 units delivered over the past 12 months, vacancy has held steady, and rents have continued to grow by 2 to 3 percent. But with another 10,000 units under construction, Charlotte is at a critical juncture. With the pipeline at an all-time high and new projects being announced seemingly every week, will there be enough continued demand to absorb the next wave of deliveries? The ability to absorb the pending supply is largely based on the area’s favorable demographic trends and potential job growth. Between 2000 and 2010, Mecklenburg County’s population grew by 32 percent, over three times the national average, and that trend has continued with more than 7 percent growth since 2010, including the second-highest growth rate in the state from 2012 to 2013. Moreover, since 2010, Mecklenburg and Wake (Raleigh/Durham) counties have accounted for nearly half of the state’s overall population increase. That pattern mirrors a national trend of a growing desire to live in an urban environment. That paradigm shift is largely based on …
Construction of apartment buildings is leading the Denver metro area’s building boom, with more than 19,000 units starting construction in 2012 and 2013 that are expected to be delivered this year. This is the most apartments this market has added in such a short period of time in more than 40 years. This construction boom follows a stretch where we saw little multifamily development, which created a short-term need to catch up with current population growth demands. Some perceive this level of development as overbuilding, though recent population growth statistics may indicate otherwise. The Downtown Denver area is particularly hot for apartment developers, with about 4,000 units under construction. The majority of this work is being done around the Denver Union Station transit station. The activity is being fueled by the region’s population growth, which averaged 1.7 percent per year between 2007 and 2012, maintaining a stable expansion rate through most of the recent recession and recovery, according to the Metro Denver Economic Development Corp. The organization projects population growth — mostly attributed to strong net migration — will moderate slightly to 1.6 percent this year, which is more robust than the projected U.S. growth rate of less than 1 …
Is the Dallas/Fort Worth multifamily market headed back to the same level of intensity we experienced from 2005 to 2007? Most of the signs suggest that we are on track to not only meet this same amount of demand, but also outperform the market of the mid-2000s. So what are the drivers that are leading this investor demand? First, as a whole (not only Dallas/Fort Worth), Texas is flourishing right now. The state leads the nation in job growth, gaining nearly 300,000 new jobs in 2013, with one-third of those being considered high-paying jobs. Second, Texas leads the nation in population growth. These new residents benefit from the affordability of Texas versus that of other states. Here, we enjoy no income taxes and a lower price of living. In turn, this provides a better quality of life. Performance Needless to say, such growth and business-friendly conditions have a large impact on the multifamily sector of commercial real estate. Occupancies are the highest they’ve been in more than a decade. The current overall vacancy of 5.4 percent is a full 100 basis points below the level we saw 12 months ago, and effective rents have increased by 3.3 percent in the …