December 4, 2017

Now They’re Having Trouble Filling Them

A report from Multi-Housing News on Washington. “Alex Henderson, who leads Grosvenor’s Puget Sound Co-Investment team, foresees renewed interest in development, given the potential oversupply of rental product and undersupply of for-sale product in the area. Henderson: ‘To my knowledge, there are very few condo products coming out over the next two years, especially in comparison with apartments, which continues to be a major challenge and opportunity for the Seattle housing market. When you look at the full development pipeline of Seattle, we are expecting 12,000 rental units this year and only a handful of condominiums.’”

The Seattle Times in Washington. “The strong economic growth of Seattle and Washington state appears to be downshifting. This assertion comes with plenty of qualifiers and questions, but early data are undeniable. I’m also skeptical that slower growth, or even an outright recession, would have much long-term effect on house prices in the city or the most desirable parts of the metro area. We’re now part of the enduring West Coast levitation seen from San Diego to San Francisco, lately in Portland, seemingly forever in Vancouver, B.C.”

“On the other hand, a growth slowdown might hurt. If it gets weak enough, we land in a ‘growth recession.’ That’s not an actual recession, where output goes into negative, but a slowdown significant enough that it shocks the economy. If a car suddenly goes from 90 mph to 25, you’ll feel it. Your face might hit the dashboard.”

The Mercury News in California. “Apartment prices in the Bay Area dipped last month, but renters, don’t breathe a sigh of relief — analysts expect prices to continue to climb in 2018. ‘Even when rents dip a little bit, they’re still more than twice the national average,’ said Sydney Bennet, a researcher for Apartment List. Nationwide, apartment prices fell in two-thirds of the major cities last month, she said.”

The Business Report in Louisiana. “The multifamily market in Baton Rouge appears to have softened in recent months, a result of continued pullback from the effects of last year’s flood and a seasonal slowdown. Craig Davenport of Cook, Moore & Associates says he’s generally seen some lower rents, more concessions offered to tenants and lower occupancy at apartment complexes in the area. Multifamily broker Chad Rigby says the market is ’softening’ as effects from the flood continue to dissipate and we enter the holiday season.”

“The student market, however, is one segment that is clearly being overbuilt, he adds. LSU is adding several hundred units with Nicholson Gateway and it recently announced a policy to require students to live on campus for their first year, moves that are expected hurt off-campus student housing properties.”

The Longview News-Journal in Texas. “Rents in the Longview area ticked down in November from the previous month and are down 3.1 percent year over year, according to Apartment List. The 0.7 percent monthly rent decline in Longview seems to be an ‘aberration,’ said Jim Tucker, owner of the Fairways Apartments on McCann Road, which has 152 units. ‘That really doesn’t happen unless we are in a recession or depression,’ he said.”

“The downward trend came as no surprise to Karen Holt, housing navigator with the East Texas Aging and Disability Resource Center in Longview. In a statement, she cited ‘aggressive, high-end conventional property development’ in recent years.”

“‘Based on numerous data sources, the supply for conventional or high-end properties is far greater than the demand at this time while the supply of affordable housing is lower and demand much higher,’ she said. ‘This effect causes rental rate drops on older, conventional properties trying to keep up their occupancy levels to maintain a level of financial security and compete with the newer properties that have been built in the past few years.’”

From KCCI 8 on Iowa. “This year alone, developers have built 4,000 new apartments in downtown Des Moines, but now they’re having trouble filling them. Buyers have so many options they don’t feel the pressure to make the decision to rent, so in order to entice renters, apartment complexes are offering $1,000-dollar gift cards, gift packs and even a couple months of free rent.”

“‘Four thousand brand new apartments have been added this year, and they’re adding 2,000 more for next spring and summer,’ said Brooke Van Sickle, assistant property manager at Confluence on 3rd. But all these new apartment complexes are having trouble filling their open spots. With so many options, people don’t feel a sense of urgency to rent. ‘People who are normally 100 percent full with their waiting list are now sitting between 90 or lower rates,’ Van Sickle said.”

“Confluence on 3rd opened in June, and they are still only 85 percent full. They are now offering a special of $300 off rent; and they’re not alone. ‘Everywhere downtown has to offer a special right now, which is odd. Downtown has never had to offer a special before,’ Van Sickle said.”

“R&T Lofts is offering two free months rent and has waived administration fees. Maxwell is offering one free month rent and different gift packages. ‘(It) helps to entice people to want to rent and it kind of keeps you competitive price wise, which is helping to drive the rents a little bit lower even,’ Van Sickle said.”

“‘Des Moines is on the map. It’s just on fire,’ said Lisa Howard, a real estate agent with Coldwell Banker. ‘Developers are coming down here and building or renovating old historic buildings.’ Howard does not think the low rent prices will stay for long. ‘The prices are high downtown. It’s expensive, and there’s high demand,’ Howard said. ‘Unless that demand changes, I don’t see the prices coming down. I really don’t.’”