Apartment development is ramping up across the U.S., creating significant concerns for multifamily operators in 2013 and 2014. Nevertheless, there is pent-up apartment demand. Slow but steady job creation is allowing college graduates to move out of their parents’ homes or to shed the extra roommates who assisted with living expenses. Additionally, construction averaged fewer than 70,000 rentals in the past three years, compared to 130,000 units annually prior to that span. Yet more than 100,000 apartment are expected to come on line nationwide this year alone. While many of the Northern California apartment markets are typically high barrier-to-entry metros for developers, supply concerns are mounting in some areas. Fortunately for apartment operators in the region, a majority of this construction is occurring in the largest metro areas. Elevated populations and job creation in these metros will bolster demand and ease supply-side vacancy pressure. Although construction activity will elevate for the foreseeable future, the biggest Northern California inventory additions will occur in 2014. About 10,000 units will come on line in the region next year. Deliveries will be greatest in San Jose and San Francisco between 2013 and 2014 as 7,000 units and 6,700 units are delivered, respectively. The surge …
Multifamily
Orlando has always shown an uncanny ability to grow, diversify and prosper, all while shrugging off a few economic hiccups along the way. Now, it appears that “the City Beautiful” is doing it again, with apartment development leading the way. Not since Lincoln Property Co. built the 164-unit Aspire apartments in 2008 has any significant multifamily rental development taken place in downtown Orlando. Yet, over the next two years more than 2,000 new rental apartment units are expected to dot the downtown landscape. This represents an untested pace for downtown, higher than any other two-year stretch in Orlando’s history. Although the addition of this many units may raise some concern (especially understanding Orlando’s history of overbuilding), several well established multifamily developers have taken a deeper look into Orlando’s urban lifestyle; and they like what they see. It would appear that through a mix of public/private partnerships, infrastructure improvements and quality of life, downtown is on the verge of moving one step closer in its quest of becoming one of the most robust “live-work” cities in the U.S. Laying the foundation for its continued transformation is the nearly $5 billion in capital investments that have been, or are being, invested in …
Positive demographic trends, low interest rates and Boston’s stable economy inspired a surge of investments in the New England multifamily market. Last year, multifamily transaction volume neared $1.2 billion across the region, roughly 70 percent of the $1.6 billion peak we experienced in 2007. Transaction volume has increased every year since 2008, fueling competition for product and driving down cap rates. Investors pursuing deals in Greater Boston’s inner ring are accustomed to cap rates in the low 4s and sometimes below. While low cap rates have been great for sellers, they are causing some investors to widen their investment parameters. Many groups are finding Boston’s economic momentum resonates beyond the 128 beltway, allowing for rental increases and limited vacancies previously unrealized. ARA has tracked sales from Rhode Island to New Hampshire and has seen an influx of foreign equity, mainly from Asia, the Middle East and Australia. This trend represents a change from the last cycle when Europeans, mostly Germany and Ireland, were the largest foreign capital source in the region. In recent years, the majority of investments targeted by these foreign players have been in the city of Boston and the immediate suburbs; however, ARA has tracked recent sales …
“Hot” does not adequately describe Miami’s current residential real estate climate. Back from the brink of extinction in late 2009, the residential condominium market in Miami is currently booming. The apartment market is booming as well, but did not take it on the chin like the condominium market did. From 2009 to 2010, Greater Downtown Miami was considered one of the most overbuilt markets in the country. Developers delivered approximately 34,000 condos in the market in a six-year period, more than double what was delivered in the prior 40 years. The majority of those units came on line during the crash, which left Miami with an unsold inventory or more than 20,000 units in early 2010. Forecasters expected it would take 10 or more years for that inventory to be absorbed. Today that inventory of developer-owned units is down to less than 900, according to Condo Vultures, Miami’s condo watchdog. One can almost say that Brazil and Argentina brought back Miami’s high-rise condominium market. Brazilians and Argentineans in particular, but not exclusively, have experienced hyperinflation — to the point of scheduling the purchase of groceries on payday — like few others. They therefore have an acute understanding of the need …
There appears to be no sign that the recent growth experienced by many Texas metropolitan areas is slowing down anytime soon, and Fort Worth is no exception. Substantial job growth, solid multifamily fundamentals, low interest rates and a pro-business climate have put many eyes on the Fort Worth market. The Fort Worth-Arlington MSA is experiencing positive job growth, and is listed as one of the best performing metros in the nation. The MSA added 36,700 jobs, an expansion of 4.2 percent year-over-year ending February 2013. The MSA also experienced an unemployment improvement of 0.8 percent. This was the largest year-over-year percentage increase in employment among all metropolitan divisions and good enough to be ranked 13th nationally in job addition. Many of these jobs have come from the numerous road construction projects that the area has undertaken, such as the North Tarrant Express, which has more than 1,100 employees working on the corridor. The $2.5 billion project just passed the three-year mark and is currently ahead of its estimated completion date of June 2015. When complete, the North Tarrant Express will run from Interstate 35 West in Fort Worth to Industrial Boulevard in Euless, relieving congestion, improving safety and providing for …
Birmingham — Alabama's largest apartment market — is in the midst of a continued recovery from the economic downturn. The city posted a net-gain in jobs, occupancy and rental rates, which has helped spur new development, particularly at close-in urban locations. Last year was a turnaround year for Birmingham. The city gained 700 jobs and the Birmingham-Hoover unemployment rate dropped to 5.8 percent by December, two percentage points below the national average, according to the Bureau of Labor Statistics. The gain in jobs was the first annual increase since 2007. For the apartment market, 2012 results were strong: a 2 percent increase in occupancy pushed occupancy rates to 93.2 percent market-wide. Additionally, rent levels increased by 3.2 percent in 2011 and 1.9 percent in 2012, according to MPF Research. The favorable market dynamics have drawn the attention of regional and national investors, which has led to healthy transaction and development volume. In 2012, 27 apartment complexes traded in the Birmingham MSA, totaling approximately $300 million in volume. Both local owners and several owners headquartered in New York and Florida, for example, made significant investments in Birmingham, including the CLK Properties acquisition of the five-property Park Lane portfolio in April. On …
The Inland Empire apartment market improved slowly since the end of the recession, as apartment demand received little help from the local job market. In the past year however, an economic recovery finally began to take shape, boosting expectations for accelerated improvements in apartment fundamentals. Prior to 2012, local payroll growth significantly lagged state and national gains. After the U.S. shed more than 8.7 million jobs, employers rehired nearly 66 percent of workers so far nationally. Meanwhile, as 53 percent of laid-off Californians returned to work, the Riverside-San Bernardino metro recouped just 31 percent of the jobs lost. Despite the slow overall recovery in the employment market, Inland Empire job creation surged in 2012. Metrowide employment increased by 34,400 workers last year. This represented a gain of 3 percent and was the largest 12-month rise since September 2006. In comparison, state and national headcounts expanded just 2.3 percent and 1.7 percent, respectively. Hiring has accelerated so far in 2013 with both public and private employers announcing hiring plans. The Riverside County Sheriff’s Department will add 500 deputies, while AT&T plans to add 500 California workers. Many of these workers will be based in Riverside. With job creation expected to build …
In the words of Benjamin Franklin, New Jersey’s multifamily housing investment market is “a barrel tapped at both ends,” with fluid trading activity extending from the Hudson River’s Gold Coast to the shores of the Delaware River. Statewide, multifamily properties continue their reign as one of the healthiest investments. Low vacancy rates, convenience to mass transit and a high concentration of properties, particularly in Central and Northern New Jersey, continue to feed the appetite of investors who are hungry for virtually any building class. Thanks to the state’s choice location along the Boston/New York City/Philadelphia/Washington, D.C., corridor, New Jersey has historically been, and continues to be, one of the strongest and most desirable markets for multifamily investments. From urban walk-up buildings to suburban garden-style apartment complexes, the Garden State boasts some of the best multifamily housing stock in the nation. This is further bolstered by a strong average occupancy rate of more than 95 percent and durable rent growth. Both of these conditions are fueled by the enduring effects of the residential housing crisis as well as people “priced out” of cities like Philadelphia and Manhattan, who are seeking a more affordable living option. These migratory tenants are flocking to …
The Omaha apartment market remains a strong performer. According to MPF Research, Omaha’s apartment occupancy stood at 95.5 percent at the end of 2012, up a modest 80 basis points from the end of 2011 and in line with Omaha’s average occupancy rate of 95.9 percent since 2000. Coupling the strong occupancy rate with a continued favorable financing environment, it is no surprise that developers are eager to bring new units on line and move quickly to lock in permanent financing. As a result, 2012 saw 1,225 multifamily housing building permits issued, which was very much in line with my predicted total of 1,300 permits for the year, and up 25 percent when compared to 2011. The addition of 1,225 units will increase the apartment housing stock in Omaha by 1.4 percent on an overall inventory of approximately 88,000 units. My expectation is that permit activity will again be around 1,200 units for all of 2013, with a small chance that it could possibly increase to as many as 1,400 units. There are a number of local and regional developers who are actively seeking multifamily land, and the lack of top sites is likely to be the biggest development constraint …
Multifamily development in the State of Hawaii and specifically on the Island of Oahu is primarily focused on for-sale condominium development. This has limited new developments of rental projects, leading to a critical shortage of affordable housing. In response, county governments implemented workforce housing requirements on new developments. The limited supply of rental housing is reflected in the region’s low vacancy rates, creating upward pressure on rental rates. Perhaps the primary reason for the limited supply and resulting high rental rates in Hawaii, and on the Island of Oahu in particular, are the significant barriers to entry. The primary barriers are the high cost of land and the infeasibility of developers to put together rental residential projects without public subsidy. Secondly, building regulations and urban boundary limits aimed at reducing sprawl have constrained the amount of land that can be developed with residential uses. Additionally, a stringent and often lengthy entitlement process adds time and risk to projects, further reducing their financial feasibility. The conversion of military housing to private use over the past decade resulted in an increase in private sector apartment units for Honolulu County. However, this was a transfer from the public to the private sector, rather …