A Market Glut Of Dense, Expensive Housing
A report from the Daily Herald in Utah. “In Utah County, the housing market is not being able to keep up with demand, according to Wayne Parker, Provo’s chief administrative officer. ‘There is a housing shortage along the entire Wasatch Front,’ Parker said. ‘A lot of investors are buying up homes and anticipating flipping those homes.’”
“Orem spokesman Steven Downs added, ‘We aren’t ignorant to the fact that some in our community are frustrated with the number of apartments that have been built in the last handful of years. It is always a difficult balance to provide adequate housing. However, with the occupancy rates remaining near all-time lows, it is safe to say that there is no data to suggest that Utah County is ‘overbuilt’ in regards to housing.’”
From The Columbian. “Apartment construction in the suburbs of Portland is the most active it’s been since 1996. After an intense two years of low vacancies and high rents, the influx of new units may slowly provide some relief to renters, according to Portland-based apartment appraisal specialists Barry & Associates. There has been a rapid increase in urban land value, and available land is becoming scarcer. ‘That pushes apartment developers out to the suburbs, where you can get more bang for your buck,’ said Patrick Barry, a certified general appraiser.”
“For instance, in 2013 the median value of an apartment unit in Clark County built between 1960 and 2000 was $69,756, according to Barry’s analysis of data from CoStar Group Inc., a commercial real estate marketing company. Three years later that median value was $100,037 — an increase of 43 percent. The year-to-year increase from 2015 to 2016 was 30 percent. The value of newly built apartments is much higher, Barry said.”
“For a long time, Clark County’s rental vacancy rate has hovered around 2 percent. People looking for rentals may notice that incentives are being offered again as the market becomes more competitive. Some listings on craigslist.org are advertising two weeks’ free rent, or $500 off first month’s rent, no move-in fees, and water/sewer/gas included along with free cable.”
“It may be strange to recall, but in 2006 Portland was among a list of 10 major cities considered the least expensive rental markets. Back then, average rent was $740 per month, according to Marcus and Millichap. Today, it’s more than twice as high and Portland appears on lists of the most expensive rental markets.”
The Chicago Maroon in Illinois. “Antheus Capital, the parent company of Mac Properties, sold the East Park Tower to a New Jersey investor for $23.5 million in February, according to Crain’s Chicago Business. The East Park Tower is a hotel apartment building. According to Crain’s, when Antheus took out the $112 million loan from LaSalle Bank in 2007, the Hyde Park apartment portfolio was expected to generate around $11.9 million net cash flow each year. However, the highest cash flow the property ever achieved was only $6.1 million in 2015.”
“The investor that bought the East Park Tower is Blumberg & Freilich Equities, a firm usually active in the New York City market. The East Park Tower is the first piece of property that the firm purchased in Chicago. A partner at Blumberg & Freilich Equities, Ted Silverman, told Crain’s that ’so many investors are bidding things up into the stratosphere’ in New York, making the prices in Chicago much more attractive.”
From Modern Luxury on California. “What does a developer do when its luxury housing sits empty? Partner with a shadowy startup to divvy it up and stock it with millennials. At the heart of many of the Bay Area’s tech megacorporations is a simple quid pro quo: In return for free media, professional connections, or cheap rides, you surrender privacy. Now, inevitably, that arrangement has moved into the realm of housing, with a hush-hush startup asking tenants to sacrifice privacy in return for a discount spot inside a gleaming new luxury tower.”
“These arrangements, which come complete with subdivided bedrooms featuring upholstered partitions between roommates’ beds, come courtesy of HomeShare, a startup that carves up rooms inside of unoccupied luxury apartments and then vets and links up strangers to occupy them. Why all the secrecy? HomeShare now operates dozens of units in four brand-new Bay Area luxury towers. And its success and its shyness likely stem from the same source: a market glut of dense, expensive housing. Since the beginning of 2015, nearly 22,000 units have been built or approved in San Francisco (excluding the massive Candlestick Point development).”
“Of these, 19,500—89 percent—are ‘above moderate,’ meaning they can likely only be afforded by individuals making more than $90,000 a year. ‘We are in the midst of the biggest apartment-building boom since World War II,’ says Patrick Carlisle, chief market analyst at the Paragon Real Estate Group. But this boom comes with a downside, and not just for tenants who can’t afford the lavish new spaces popping up downtown like mushrooms after the rain. ‘Lenders seem to be fearful that we are reaching a saturation point for these sorts of units,’ Carlisle says.”
The Journal Sentinel in Wisconsin. “Things have changed since fall 2015, when David Winograd unveiled plans to develop a 12-story, 164-unit luxury apartment development in Walker’s Point. Construction costs increased, Winograd said. More importantly, several other new apartment projects surfaced in downtown Milwaukee and nearby neighborhoods. So, Winograd canceled his plans to build the $30 million development.”
“That project’s demise is a high-profile example of a drop in apartment development activity throughout the Milwaukee area, including its suburbs. Wangard last May received city approval for its proposed $24 million project at N. Water and E. Brady streets. The firm continues to pursue all three projects, but there are no definite construction start dates, said Stewart Wangard, chief executive officer. Part of that hesitation is tied to the large number of new apartments being built nearby, he said. About 1,200 new apartments are being completed in 2016 and 2017 within a three-mile radius of the firm’s three projects, Wangard said.”
“‘We knew that there was going to be a spike,’ he said. ‘We’re now working through that.’”
The Daily Orange in New York. “For citizens who have led, observed and revitalized the city of Syracuse for decades, the development of private student housing is another chapter in a story about the city’s housing market, which has been subjected to the push and pull of the University Hill tide. But the rate at which the industry is growing has raised concerns among community members that Syracuse is approaching a tipping point between opportunity and instability.”
“The city, which had eight existing student housing properties at the time, saw a wave of development proposals at the end of 2016. Since then, three projects have been approved by the Syracuse Industrial Development Agency to add 1,240 beds to the city by the 2018-19 academic school year. ‘What really is the concerning element right now is that there are seven, eight, nine of these developers coming — all with the same product, all at the same time,’ said David Mankiewicz, who came to Syracuse in the late 1970s to work with the Metropolitan Development Association. ‘So the question is: How deep is the market? Where are the students who are going to fill all that space?’”
“Mankiewicz fears the consequences an overbuilt student housing market will have for the city because he has already seen what happens when the market isn’t deep enough. Early on in his time in Syracuse, Mankiewicz saw vacancies plague the downtown corridor after a surplus of office buildings were constructed — disinvestments he said took the collective efforts of the Syracuse community 30 years to fix — and watched downtown bleed retail when shopping malls surrounded the suburbs of Syracuse heading into the 1980s.”
“‘In a city the size of Syracuse, it takes forever to fix those mistakes when we overbuild. So that’s my fear here. We’re going to do it for the third time. We’re going to do it to ourselves,’ Mankiewicz said. ‘The result is going to take us back, and I don’t know how many years it will take to fix what’s left behind of the neighborhoods.’”
