November 5, 2017

Over-Built, Over-Bought And A Ton Coming Online

A report from Bisnow on Georgia. “A Texas developer is debuting its mixed-use endeavors right next door to the new Mercedes-Benz North American headquarters, a move that could be just the start of a host of new projects in Atlanta for the firm. Dallas-based StreetLights Residential has broken ground on Aria Village, a mixed-use community crowned by a five-story, 355-unit apartment project called The Alastair. StreetLights is pursuing new projects when more than 10,000 new apartment units are already underway in Atlanta. This has led to a flattening of rent growth in the metro area, according to a recent report by Adobo. ‘Some typical hot rental markets across the nation are showing signs of cooling off … with the usually popular markets of Atlanta, San Jose and Nashville all showing decreases in price,’ Abodo Senior Communications Manager Sam Radbill wrote. ‘In Atlanta specifically, prices have declined .09% from October to November, and many experts think that this trend will continue. Many cities have over-built and over-bought and Atlanta, with a ton of new developments coming online, may be one of them.’”

“The issue is something StreetLights Residential, which has numerous developments in Texas as well as projects in California and Phoenix, is keeping an eye on, said StreetLights Residential Senior Vice President of Development Fred Kay. ‘That’s obviously the magic question, is the market overbuilt? We don’t feel like it is,’ he said. ‘Time will tell here, but we’re pretty strong on the market even still.’”

From the Arizona Republic. “Want to invest in a metro Phoenix apartment-building boom? It could cost you as little as $1,000, about as much as a monthly rent payment. Neighborhood Ventures, Arizona’s first crowdfunding real-estate company, recently formed to invest in Phoenix-area apartments. A veteran Valley apartment broker, a multifamily-research expert and a former Wall Street analyst teamed up to create the company.”

“Thomas Brophy, a Neighborhood Ventures partner, is director of research for ABI. When he described the plan to launch a crowdfunding program to buy metro Phoenix apartments, my first question was why now, with so many new rental complexes under construction. He has been saying for the past several months that apartment developers aren’t overbuilding in the Valley — not even in central Phoenix, where it seems as if a new complex is underway or has recently opened at every major intersection.”

“On average, Phoenix-area rental complexes are leasing 24 apartments a month, up from 20 a month last year. And that rate of leasing increased even as 2,600 new apartments opened to renters during the summer. 17,350 apartments are under construction now across the Valley. But the number of new apartment units planned has plummeted by more than half from last year, to 11,700. That means construction on significantly fewer apartment complexes in the near future. That’s a good sign pointing toward a slowdown in building to prevent a boom and bust.”

From the Colorado Springs Gazette. “In the first decline in nearly three years, the cost to rent an apartment in Colorado Springs fell by almost $10 a month during the third quarter, a new report shows. That drop, however, doesn’t necessarily signal tumbling rents or a slowdown in demand for apartments. But it is possible rent increases will cool as more new units are built and competition for renters heats up, said Laura Nelson, executive director of the Apartment Association of Southern Colorado.”

“‘Those that can afford to are going to move into the newest product,’ she said. ‘And that’s going to create maybe more competition to that next layer that’s going to have to do something to attract that renter to fill up their units, which are then going to pull from the next layer.’”

“A flurry of new projects - including some downtown and others on the north and northeast sides of Colorado Springs - will add about 1,000 units to the market over roughly the next six months, Nelson said. Those would be on top of nearly 1,500 apartments added so far this year. Those units should help stabilize rents, Nelson said. But by how much? That won’t be known until the apartments open and renters move in, she said. ‘I doubt that rents are going to drop,’ Nelson said.”

From City Limits on New York. “Nearly 100 apartments that were up for grabs at Pacific Park through the city’s affordable housing lottery a year ago are now being listed on StreetEasy, because not enough of the lottery winners would take them. When asked what caused the vacancies, Ismene Speliotis — executive director of Mutual Housing Association of New York (MHANY), which has run the housing lottery at 535 Carlton Ave. and two other Pacific Park buildings — said all of the empty units are reserved for a specific group of people: those earning the most money.”

“‘I think we should be looking at that income band and understand it, because we don’t want units to go vacant during a housing crisis,’ she said.”

From on California. “Funny how homelessness and the displacement of low income families by inordinate rent increases get turned against each other as issues. They are shunted into separate political domains, though building affordable housing would resolve both. Two years ago, the city of Berkeley admitted that the only real solution for the problem (aka travesty) of low income tenant displacement was building affordable housing.”

“(’Affordability,’ on HUDs standard, means that the maximum rent chargeable is 30% of the tenant’s income). Building ‘market rate’ housing has put the city on a treadmill, huffing and puffing to get housing built, and getting nowhere in terms of resolving the affordable housing crisis. In fact, Berkeley has glutted itself with market rate housing, having fulfilled its requirement under Plan Bay Area. Today, one sees banners on big apartment buildings over a year old still announcing ‘Now Leasing’ and ‘Apartments available.’ Indeed, in the face of this glut, developers are now approaching the Planning Dept. with a demand that they be able to condo-ize.”

From The Real Deal on Florida. “Billionaire Jeff Greene, the dominant real estate investor in West Palm Beach, has pulled back from what was to be the city’s first foray into micro apartments, after concluding that the numbers don’t work. Greene intended to compensate for the small size of the units with first-class amenities, including a pool, a fitness center and a screening room. But that model has a downside. ‘Amenities cost a fortune,’ Greene said.”

From KFYR in North Dakota. “A little relief for renters – according to a new national survey, housing prices are on the decline. Here in North Dakota, the receding oil glut, has opened up a lot of real estate. ‘There’s definitely more vacancies available now – especially with the big apartment complexes, now we’re seeing there’s free rent being offered, and before that, you could barely even find a place,’ said real estate broker associate Kirstin Wilhelm.”

“‘I think the lower the rent, the better, because it keeps more money in the renter’s pockets, which can be translated to the community,’ said Bismarck Renter TJ Jerke.”

“Wilhelm says another reason for the available apartment surplus – is that more people are buying. Real estate agents say right now buyers have the luxury of being able to shop around since availability is abundant.”