An Industry That’s Starting To Get Spooked By Luxury
The Portland Tribune reports from Oregon. “Martha McLennan, the executive director of Northwest Housing Alternatives, a nonprofit which builds and administers affordable housing in Oregon, said that she has also seen cases in Portland and Gresham in which a buyer purchases an apartment complex, removes its current tenants, renovates the building and returns it to the rental market at a significantly increased rate. Another problem, McLennan said, is that many of the apartments that have been recently built are geared toward a certain class of buyers. ‘We’ve seen more and more housing coming on the marketplace, but it’s coming in at the highest level,’ she said.”
“When those apartments are snapped up, property managers elsewhere take note, and increase the rate in their own facilities to similar levels, she said. ‘That is resulting in the triple-digit rent increases that people are getting,’ McLennan said.”
The Seattle Times in Washington. “In King County, the average one-bedroom apartment built since 2010 rents for $1,787, according to apartment-market research firm Dupre+Scott. For one-bedrooms in properties built between 1900 and 1944, the average is $1,298. That’s partly because new buildings have more amenities and modern design, said Mike Scott. With their old brick apartment building near Lake Union scheduled for demolition, longtime neighbors Cortney Clayton and Meaghan Howell scrambled to find new homes in Seattle’s hot housing market. They ended up in more expensive places, miles apart, after somewhat stressful searches.”
“Her hunt ‘came down to the wire,’ Howell said. And then she had to make a snap decision. ‘If you don’t want it,’ her new landlord told her in a matter-of-fact way, ‘I have eight people who do.’ The 1927 building was near the epicenter of Seattle’s Amazon-fueled boom. Its 22 units gave way to the wrecking ball and plans by a California developer for a seven-story, full-block design with 282 apartments and 259 parking stalls. Sold 15 years ago for $1.8 million, the property fetched $16.7 million this past summer. ‘It’s really the value of the dirt versus the value of history. And often the dirt has so many zeros after it,’ said Kji Kelly, executive director of Historic Seattle, a preservation group that’s been calling attention to increasing demolitions.”
“In all, 2,104 housing units in Seattle have been demolished since 2012 to make way for new buildings. Permits to demolish an additional 1,647 units are pending or under review.”
WOWT in Nebraska. “If you’re looking for a place to live in Omaha, you’re in luck. Rental properties are booming in the metro. They’re propping up throughout Omaha, mainly in Midtown and Downtown. Molly Skold is VP of Marketing with Midtown Crossing; she says construction on brand new apartments will help with demand in the area. Two years ago, there were 1-bedroom models at Midtown Crossing that cost about $800 a month. Now, Skold says the lowest is $1,000 and they’re 95 percent full. ‘Just in our little pocket of area there are 900 more apartment units and that’s exciting,’ said Skold. ‘Rent is very expensive historically — at all-time highs basically.’”
“UNO’s Research Coordinator David Drozd at The Center for Public Affairs says that competition is also raising rents in Omaha to all-time highs. Drozd says the demand will slow down in the coming years as the demanding population gets older he says developers should be cautious. ‘It’s going to soften at some point so you don’t want to get overbuilt the way that Arizona or Florida did with some of their units,’ said Drozd.”
The Philadelphia Business Journal in Pennsylvania. “A question that continually comes up is how is Philadelphia’s apartment market doing and whether the city can absorb multifamily projects hitting the market or in the pipeline. Axiometrics, a firm that tracks the multifamily and student housing markets, finds the Philadelphia apartment market has been ‘volatile’ during the last three months. Apartment landlords in new and not-so new apartments have started to compete for renters by enticing them with a range of offers.”
“A cursory review of a dozen properties show some of the most common concessions include move-in specials, reduced rates on select units, special offers on others and at least one-month free. The need to lure renters in with concessions, no matter how small, does say something about the market and that it may be softening a tad as more new or converted properties come online.”
“Axiometrics was also concerned about continued job growth in the city, noting 600 new jobs were generated during the last 12 months. As it stands now, 4,380 apartments are under construction or expected to come available during the next 36 months in the city.”
Real Estate World on New York. “In spite of Manhattan’s growing supply of luxury condominiums, there are signs that expensive apartments are starting to lose their appeal with buyers. According to Douglas Elliman’s third quarter report, the price per square foot in Manhattan hit a new record of $1,497. The biggest deal during the period was for ‘Penthouse One’ at luxury condo building, The Charles, which sold for $38 million. While the transaction is typical real estate headline fodder, it may stand as the high point for an industry that’s starting to get spooked by ultra-luxury condos that are staying vacant.”
“‘I think in general it’s hard to be across-the-board bullish about new condo development in New York. In fact, I think the opposite is much closer to the truth,’ said Lauren Hochfelder Silverman, a managing director at Morgan Stanley Real Estate Investing. According to research from Douglas Elliman, newly constructed apartments that were sold during the third quarter spent 125 days on the market, up from 88 days during the same period a year before.”
“As Silverman’s firm sours on high-end condos, at least one capital source remains optimistic about condo development. According to John Galiano, a senior managing director at Tishman Speyer, Chinese investors remain bullish on condos. ‘A lot of money that been coming out of China, just from a cultural perspective, their view is a lot more shorter-term than your typical investor. They’re doing more strategic acquisition unless it’s condo development, because condo development will turn into capital quickly. I think that’s one of the interesting dynamics when you’re thinking about where capital’s coming from for deals,’ he said. Some of the newest condo projects in town are either being developed or targeted towards the Chinese.”
Community Impact Newspaper on Texas. “Residential developers are continuing to eye the Tomball and Magnolia area for a number of new master-planned communities and subdivision expansions amid a nationwide slump in the price of crude oil. Meanwhile, the steepest decline of home sales for the year in the Greater Houston area took place during the month of October, according to a Houston Association of Realtors report from Nov. 11. Single-family home sales fell 10.2 percent compared to October 2014.”
“While the oil industry remains uncertain, new homes are continuing to be built despite an overall decrease in home buying in the area, according to HAR statistics. This trend can be seen in both Tomball and Magnolia as buyers are waiting to see how new residential development affects the real estate market, said Pat Navarette, owner and broker at Tomball-based real estate company Texas Sage Properties.”
“‘All of a sudden we’ve had an influx of sellers that were going to sell, but now they want to hold onto property and lease it and see if the market turns [around] next year,’ Navarette said. ‘We’re leasing [properties] as quickly as we can get them.’”
“Navarette said an increase in inventory early next year could help the area become more of a buyer’s market. However, she said she does not anticipate the market to return to conditions similar to 2008 before the nationwide housing market collapse. ‘It’s going to take a year or more [for the market to stabilize], and I don’t know that it will ever be the way it was before,’ Navarette said. ‘But it’s actually kind of healthy that it’s swaying back and forth like this.’”
