A Reason As Simple As The Law Of Gravity
A report from National Real Estate Investor. “Earlier this year it seemed like student housing properties were immune from the slowdown in investment sales. Sales for other property types had slowed dramatically compared to 2016. But the volume of single-asset student housing properties bought and sold in the first months of 2017 matched the beginning of 2016, which proved to be a record year for the sector. No longer. ‘That story about student housing outperforming on sales volume does not hold water anymore,’ says James Costello, senior vice president with Real Capital Analytics. ‘It was the case through 2016 even as the apartment market faltered. Now though, deal activity is falling for student housing was well.’”
“The reason for slow sales may be as simple as the law of gravity—what goes up must come down, at least a little. ‘Not surprisingly, sometime after the better yields on offer went away, so eventually did the stronger growth in deal volume,’ says Costello.”
From The Oregonian. “The housing sector has garnered the most headlines in Portland due to skyrocketing prices for renters and buyers, and rock-bottom vacancy rates for apartment-seekers. But that growth is showing signs of slowing, especially at the high end. More Portland apartment buildings are offering incentives to fill up expensive units. Killian Pacific, developer of the high-profile Goat Blocks apartment complex in Portland’s inner eastside, has leased 104 of the 247 units in five months. The company reluctantly began offering one month’s free rent to lure tenants. ‘It definitely was slower than we expected in April and May,’ said Jeremy McPherson, Killian Pacific’s vice president of development.”
The Citizen Times in North Carolina. “It’s not your imagination. A lot of apartments have been going up in the Asheville area over the past five years or so. And by a lot, we’re talking thousands. While multiple companies have had a hand in building apartments over the past half-decade, no one entity has put up more than Southwood Realty out of Gastonia. Vice President Will Ratchford said they’re done for now in Buncombe County. ‘I think the market is going to be saturated for a while,’ Ratchford said. ‘We’ve started to get some negativity about apartments.’”
The Arizona Republic. “A tax break that cities use to entice development has led to legal woes in Tempe. Basically, Tempe became the owner of a luxury apartment complexalong Tempe Town Lake this year to give the developer, OliverMcMillan, a break on its property taxes. The project, previously known as the Lofts at Hayden Ferry, is now called Salt and is slated to open this year, according to the company’s website. However, nine builders claim San Diego-based OliverMcMillan hasn’t paid them, and they have placed liens against the property.”
“Since Tempe is the property owner, AP Southwest LLC and other contractors filed a notice of claim, which is often a precursor to a lawsuit, with the city to obtain the $5.6 million they claim they are owed. ‘It would be funny if it wasn’t so horrible,’ said Jim Manley, a senior attorney at the Goldwater Institute, which has long opposed these types of tax breaks.”
From Curbed on Colorado. “Most major U.S. cities are experiencing housing shortages, which are driving up rents and forcing residents out of their homes. But few have tackled their housing challenges as voraciously as Denver, which has built a record-breaking number of units over the last year. Now the city is trying a new approach to make its existing housing more accessible: a pilot program that would rent 400 vacant apartments to people who could otherwise not afford them.”
“In his state of the city address earlier this week, Denver Mayor Michael Hancock announced a rent “buy-down” program that will take empty high-end apartments and subsidize their rents so families that make 40 to 80 percent of the city’s median income can move in. The glut of so-called ‘luxury housing’ is also an issue that many cities are facing. Affordability advocates claim developers are trying to maximize their profits by building too many of these high-end units, and selling them to foreign or anonymous buyers that leverage them as investments but may not fill them with residents.”
“The New York Times recently tracked the acquisitions of these ’shell companies’ which led to some legislative reform and a Treasury Department investigation of all-cash purchases in Manhattan and Miami.”
From Curbed San Francisco. on California. “Does San Francisco seem slightly less terrifyingly expensive today than it did four weeks ago? According to rental site Abodo, it should. In Abodo’s midyear rent report rounding up trends in apartment prices for the first six months of the year in major cities, on average San Francisco rents declined 1.2 percent per month (on Abodo, that is) since the beginning of 2017. Abodo spokesperson Sam Radbil tells Curbed SF that the rental platform can only report the figures it has, and suggests that if homes aren’t getting more affordable it’s an infrastructure issue, not a data analysis one.”
“‘We are confident that it all starts with development,’ Radbil says. ‘I don’t need to explain supply and demand to anyone. The price on new buildings is going to drive up the average and median, but at the same time as you get more apartments, landlords have less leverage and the price on more affordable places will decline.’”
From The Oklahoman. “Oil patch? What oil patch? Three years of volatile crude oil prices — at less than half the most recent peak — never spilled over into apartment occupancy or the multifamily investment market in Oklahoma City. ‘First month free’ and other rent concessions are due to another factor: Construction that never missed a beat, causing overbuilding in some pockets of the metro area. That’s the highlight of Commercial Realty Resources Co.’s midyear apartment report by broker-owner Mike Buhl: Whatever jobs have been lost to declined oil prices have been made up by other economic sectors.”
“He said there are signs of uncertainty — the banners advertising specials at the newest apartment complexes struggling to fill, especially downtown, in the Quail Springs area along Memorial Road and in parts of south Oklahoma City ‘When you drive around town, you see more of those (rent concession) signs on properties, but I think that’s just more of an effect of more inventory coming on the market, as opposed to any effects of the oil industry,’ he said.”
“‘While it comes down to what is being built and where it is being built, speculation remains that developers will keep building product and adding inventory,’ he said. ‘What I expected at this time last year was that developers would start to tap the brakes a bit on a number of construction projects. But that really didn’t happen. The amount of new construction coming to the market without some kind of slowdown does seem a bit aggressive.’”
“The Reserve on Stinson Apartments, to be renamed State on Campus Norman, 730 Stinson, Norman: 204 student-oriented units built in 2005 near the University of Oklahoma campus; sold in May for $17.6 million, a 42-percent drop from its original sale price of $30.5 million in December 2006. That was a surprise, Buhl said, considering continued strong investment in general. ‘I don’t know if that indicates any kind of trend. Probably not,’ he said.”
