January 2, 2018

Creating A Glut Of Vacant Units

A report from Mansion Global on California. “The last remaining condo unit owned by serial home flipper Ellen DeGeneres at the Beverly West building in Los Angeles is pending sale as of December 19, according to listing records. The two-bedroom spread was most recently asking $6.95 million, after receiving a $1 million price cut in June. It first hit the market in February asking almost $8 million, listing records show. Ms. DeGeneres purchased two neighboring units at the building in July 2014 for $13.2 million, records show. One of the apartments sold earlier this year for $6 million, according to records, so it’s likely that the TV star is primed to take a loss on the properties.”

“Meanwhile, her Tuscan-style villa in Montecito is on the market with an asking price of $39.5 million, less than the $45 million it was asking when it first hit the market in March.”

From AM New York. “Some fortune may indeed be forthcoming for those renting in 2018, according to market analysts tracking rent rates’ plateau and the rise of rental concessions. As several new developments open, landlords have had to offer more to lure in tenants, including paying brokers’ fees on their behalf or waiving a month or two of rent. Particularly in areas like Long Island City, Williamsburg and Downtown Brooklyn, where the number of apartments has surged, rents may be poised to decrease, according to Grant Long, senior economist at StreetEasy.”

“‘In many parts of the city rents will fall,’ Long said. ‘There’s a lot of new rental housing, and landlords are having to compete against each other and offer concessions, and inevitably cut the headline rents that they offer to folks.’”

From WESA 90.5 in Pennsylvania. “Apartment buildings have sprouted up across the East End since 2015, with cranes rising over neighborhoods including East Liberty, Lawrenceville and the Strip District. ‘If you came into town in 2013, you probably had four choices for newer buildings,’ said Paul Griffith, the senior managing director with Integra Realty Resources, a company that studies real estate valuation. ‘Now, you have 10 different choices that have been built in the past 18 months.’”

“Griffith said that developers may have overbuilt, though, as there are only so many renters looking for new construction apartments. ‘Right now we’re concerned going into 2018 or 2019, that the number of units under construction are going to outpace the demand and that we’ll see a softening of the market,’ he said, which can be seen in rent concessions offered by apartment complexes.”

The Charlotte Observer in North Carolina. “Looking back on the year, all of the major real estate sectors in Charlotte seemed to prosper. Home prices shot up, thousands of new apartments hit the market. Still, there were a few cracks beneath the veneer of strength. The thousands of new apartments opening uptown pushed its vacancy rate to almost 22 percent, nearly four times the city’s average.”

“According to Charlotte-based Real Data, an apartment-tracking firm, there were 11,674 apartments under construction across Charlotte in August – and another 12,645 on the planning board. ‘The pricing of the land has gotten to a point that when you couple that with where construction prices are right now, the economic prices are not making sense,’ said Michael Tubridy, managing director of Crescent Communities. ‘The costs to develop are far exceeding rent growth.’”

The Des Moines Register in Iowa. “Nearly 2,000 new apartments opened in downtown Des Moines in 2017, creating an issue that property managers haven’t seen in years: a glut of vacant units. Des Moines has been in a building boom for the past decade, with more than $3 billion invested in downtown projects in that time, according to the Greater Des Moines Partnership. With an unprecedented wave of apartments coming online this year, many property managers have turned to move-in specials to get potential renters in the door.”

“‘This is the first year that supply exceeds demand,’ said Jake Christensen, president of Christensen Development in the East Village, which opened 350 units in two downtown buildings this year.”

“CBRE/Hubbell Commercial, which monitors the metro’s apartment market, estimates that 30 percent of new units — or about 600 apartments — are unoccupied. Until recently, it wasn’t unusual for a new 100-unit building to be fully leased within 60 days, Christensen said. But with so many units coming online in a single year, developers and property managers have been forced to offer incentives, including free parking, gift cards, free TVs and iPads and even two months rent free to entice would-be renters to sign leases.”

From Jackson Hole Daily in Wyoming. “When you drive by the new apartment complex on the corner of Milward and Kelly at night, the lights aren’t on in many of the windows. That’s because only two of the 12 units of St. John’s Medical Center’s most recent workforce housing project have been filled. When the project received preliminary approval from the Jackson Town Council last fall, developer Greg Prugh estimated rent would be about $1,800 a month.”

“According to the Wyoming Department of Administration and Information Economic Analysis Division, the average rent for a two-bedroom, unfurnished apartment, excluding gas and electric, in Teton County in 2015 was $1,654. Chief information officer Karen Connelly said lowering the prices to attract more tenants was not really an option. Rent is set at the ‘low end of the market rate to avoid tax implications for tenants,’ she said. If the price were set substantially lower, it could be seen as nonwage income for employees and therefore could be taxed.”

“‘While that’s a possibility, that could be a headache to employees who have to deal with that,’ she said. ‘We keep a close eye on the market.’”