October 21, 2016

The Beginning Stages Of Being Oversaturated

A report from the News Tribune in Washington. “Tacoma apartment rents have increased for the 11th straight month, according to Axiometrics, a research firm that tracks apartment rentals. Seattle-Bellevue-Everett’s average rent prices in September dropped to $1,777 from August’s $1,799, possibly fueled by an increase in the number of apartments available, said Axiometrics’ senior vice president of analytics Jay Denton. ‘Seattle is still among the top-performing metros in the nation, but deliveries of new units accelerated in the third quarter and the pace is expected to quicken through the second quarter of 2017,’ Denton said in a news release.”

The Boston Globe in Massachusetts. “Rents in Boston are climbing at their slowest rate in more than two years as a surge of new apartments hits the market. A new report out Wednesday from data firm Axiometrics found that the average rent in Greater Boston fell slightly from August to September. It’s the latest sign that the wave of building in the region is having an impact on rents.”

“‘The Boston apartment market may be seeing the effects of the new supply delivered in the past six months,’ said Stephanie McCleskey, vice president of research for Axiometrics. ‘Job growth picked up in the third quarter, but the low rates earlier this year combined with the new construction provide a foundation for lower rent growth.’”

“There are signs that may continue. More than 3,000 new apartments have come on the market in the last six months, Axiometrics said, with another 1,344 slated by year’s end, and about 6,000 expected to open in 2017.”

The DA Online in West Virginia. “The term ’student housing’ at WVU has been redefined. The phrase now refers to more than standard, quiet dorm units and extends to University Apartments, like Vandalia, College Park, University Place and University Park—the latter two being the brightly lit residence/shopping complexes that sprouted up in Sunnyside and Evansdale over the past two years. These apartments combined hold 2,205 beds students can rent (not including the dorm units in University Park), but 35 percent of these remain unfilled as of Fall 2016, according to FOIA documents obtained by The DA.”

“‘A lot of people just can’t afford them,’ said David Kelly, owner and operator of Kelly Rentals in Morgantown. The biggest problem, Kelly said, is that with all the University operated apartments, corporate housing complexes (Campus Evolution, The Ridge, Copper Beech, etc) and private housing in Morgantown, there are more beds available throughout town than there are students to fill them.”

The Duluth News Tribune in Minnesota. “According to a study done by the City of Duluth in March 2012 called the Higher Education Small Area Plan, the estimated student population in Duluth is about 20,000 between UMD, CSS and Lake Superior College, with 16,000 of those students seeking off-campus housing. The problem for many students is the available housing close to campus may not be overly affordable for them, said Mike Peller, owner of Gables & Ivy Real Estate in Duluth.”

“Peller said he rents about 40 properties near UMD and CSS. The price of real estate increases the closer the property is to campus, he said, making monthly rent more expensive. Mark Lambert, owner of Campus Park Townhomes and Villas, Boulder Ridge Luxury Apartments, Summit Ridge Luxury Apartments and BlueStone Lofts and Flats, said he thinks the housing market is in the beginning stages of being oversaturated.”

“While there may have been student-housing issues in the past, Lambert said, there is a delicate balance between providing enough housing and too much. ‘This year is the first year we’ve had some vacancy issues,’ Lambert said, adding that Campus Park is 20 percent vacant.”

The Silicon Valley Business Journal in California. “Believe it or not, rents can go down in Silicon Valley. In Santa Clara County, the average asking rent in Q3 for all unit types was $2,619, a 1.3 percent decrease from the prior quarter and 0.2 percent drop from Q3 2015, according to data from Novato-based Real Answers. The slight decline in rents over the last 12 months stands in sharp contrast the nearly 11 percent year-over-year increases seen in the third quarters of 2015 and 2014.”

“A quick note on the data used: Real Answers uses average asking rents from complexes with 50 or more units, meaning smaller complexes are not represented.”

DNA Info on NewYork. “Temporary walls are this season’s hottest luxury rental amenity. Developers know that many renters need roommates to afford New York City living, and — with a glut of rentals hitting Manhattan’s market and pushing prices down — they understand that squeezing roommates in is one of the best ways to keep prices up and vacancy rates down. That means more landlords are letting renters know, whether explicitly or tacitly, that they can indeed carve out extra bedrooms with temporary walls.”

“At the Grayson, a 17-story rental on East 28th Street, a unit is listed on Streeteasy for $5,500 a month as a three-bedroom though its floor plan shows it as a two-bedroom. The description states, ‘This apt easily converts to a 3 bedroom. Full walls allowed.’ A $4,100 a month one-bedroom in the same building, states, ‘This apt easily converts to a 2 bedroom.’”

“‘We’re seeing walls and dividers in a lot of new development. There are a lot of buildings showing them in their marketing materials,’ said Karla Saladino, of Mirador, the exclusive rental agent for more than 100 buildings across the city. ‘A lot of the stuff in Murray Hill has to be convertible or people can’t afford to be there,’ she added. ‘There are only so many people who want to live in one-bedrooms in the neighborhood.’”

“Donny Zanger, founder of All Week Walls, said his business installing temporary walls dipped after the 2010 Times article about illegal walls, but recently things have been on the upswing again. Developers need the walls since they ‘put a lot of money into their buildings’ and have to command high enough rents and low enough vacancies to see returns on their investment, Zanger said.”

“Since landlords typically require a renter earn 40 times the monthly rent, that means renters for half of the one-bedrooms on the market would need to earn more than $135,800 a year. ‘You can have someone working at Morgan Stanley, and if their rent increases 10 percent and wages increase 2 percent,’ Zanger said, ‘the only way you can balance it out is by the walls.’”