March 7, 2018

They’re Kind Of Taking A Hit

A report from the Seattle Times in Washington. “Seattle’s record construction boom may have peaked: Development activity across the central part of the city is declining at the fastest rate in at least 12 years. At the end of this past year, there were 57 active projects underway in the area that stretches from South Lake Union to Sodo, according to a report released Monday by the Downtown Seattle Association. That’s down from a record high of 74 projects six months prior. The 23 percent decline amounts to the biggest six-month drop since the downtown association began its twice-a-year construction counts in 2005. It comes after a recent survey found Seattle’s crane count had dipped for the first time in years.”

“Rents downtown have begun dropping for the first time since last decade amid the construction boom, as some of the new luxury apartments opening in the city’s hottest neighborhoods have sat empty. Altogether, the area has added more than 20,000 new housing units in the past decade. There are up to 30,000 apartments still left in the pipeline, though developers recently have reported a pullback in new apartment plans now that rents are no longer keeping up with rising construction costs.”

The Des Moines Register in Iowa. “Des Moines-area renters should see a relief in rising rents this year as landlords look to fill an unprecedented wave of new apartments. Vacancies are at their highest level since 2010 and, as a result, rental rate increases have slowed, according to an annual survey released by CBRE/Hubbell Commercial. That slowdown will likely continue as more apartments open, said Linda Gibbs, senior vice president of investment properties at CBRE/Hubbell Commercial. ‘We won’t see the same kind of rent growth we’ve seen in the past few years,’ she said.”

“The metro’s apartment building boom is expected to continue this year. An estimated 3,230 apartments opened here last year, compared to 1,966 in 2016, according to the CBRE report. Another 3,061 apartments are planned this year. The number of vacant apartment units has reached a level not seen since 2010, when the United States was in the middle of a recession. Vacancies metro-wide are at 8.2 percent. The largest number of vacancies is downtown, 18.5 percent, and in the western suburbs, 7.7 percent.”

“With so many units coming online in a single year, developers and property managers have offered incentives, including free parking, gift cards worth up to $1,500, free TVs and iPads, and even three months free rent to entice would-be renters to sign leases. Those incentives will attract tenants to move away from older apartments, said Timothy Sharpe, senior vice president of investment properties at CBRE/Hubbell Commercial. Those Class B and C units — built before 1980 — often have fewer amenities and outdated finishings. The renter exodus will result in reduced rents and higher vacancies in older units over the next few years.”

“‘They’re kind of taking a hit,’ Sharpe said.”

The Houston Chronicle in Texas. “Some Houstonians displaced by Hurricane Harvey have started moving out of short-term rentals and back into their newly renovated homes or ones they’ve purchased since the flood. Occupancy across the Houston area is at 89.5 percent, up from just over 88 percent a year ago, according to a March report from ApartmentData. The urban core, however, which had a glut of units for lease pre-Harvey, still has a fair amount of vacancy. Aris Market Square is advertising three months free rent with a 13-month lease. Catalyst, near Minute Maid Park, is offering up to two months free. Alexan Downtown and Block 334 is giving two months free prorated throughout the term of a lease.”

“Landlords should find some solace in the fact that only about 7,500 new units will open this year, compared with 21,000 for each of the last two, said apartment analyst Bruce McClenny. And next year, no more than 6,000 should open.”

From the New York Real Estate Journal. “The New York Real Estate Journal recently sat down with Shimon Shkury, founder and president of Ariel Property Advisors, a New York City investment real estate services and advisory company. Q: How did the multifamily market perform in 2017?”

“A: While pricing was a notable bright spot, particularly in Queens, the Bronx and Northern Manhattan, volume in the New York City multifamily market slumped to levels not seen since the beginning of the decade, due largely to a dramatic pullback in institutional-level transactions. Dollar volume reached a six-year low amid the fewest number of transactions since 2010.”

“When compared to 2016, dollar and transaction volume declined 48% and 28%, respectively, while property volume slid 29%. Institutional investors were largely absent in 2017. New York City recorded only five sales at or above $100 million, down sharply from 26 sales the previous year. The largest sale of the year clocked in at $135 million, a level that was surpassed seven times in 2016 and four in 2015, when the largest sale in those years were $620 million and $5.5 billion, respectively. On a local level, the rental market faced well-publicized struggles last year, with median rents in Manhattan and Queens falling.”

“Q: How did the submarkets perform last year? A: On a sub-market level, Manhattan struggled in 2017, with volume metrics decreasing substantially from the previous year’s levels. The borough’s dollar volume, at $2.32 billion, was the lowest since 2010, and its 57% drop from 2016 was the sharpest decline of any sub-market. Brooklyn’s multifamily market softened, with volume metrics notching double-digit declines. Dollar volume slumped 48% to $1.48 billion, transaction volume slid 35% to 119, and building volume sunk 21% to 227. ”

“Queens activity was extremely lackluster in 2017, with transaction volume skidding 40% to 43%, the steepest year-over-year decline of any sub-market. At the same time, dollar volume dropped 47% to $849 million.”

The Union Tribune in California. “Usually, U-Haul truck rentals are advertised at an affordable sticker price, comfortably in the three-digit range. But a trend out of northern California is pushing that sticker price as high as $2,000, and moving Californians to disbelief. The cost to rent a 26-foot U-Haul truck — big enough to move a three- to four-bedroom home — out of San Francisco headed to Las Vegas reached as high as $2,085 for four days. To rent the same truck going in the opposite direction is only a fraction of that cost — $132.”

“We were curious about what it cost to rent a U-Haul truck for one-way trips to and from San Diego, so we checked and found that it was more expensive to rent a U-Haul truck traveling from San Diego to another city than the other way around. That said, prices were not as high as the ones involving San Francisco. Last month, California’s Legislative Analyst’s Office reported that the state is has experienced a net loss of about 1 million residents from 2007 to 2016.”

“An analysis from the real estate website Redfin published last month offers more evidence of this trend — San Francisco was the top city with the highest loss of residents, a net loss of 15,489 in the last four months of 2017, compared to New York City’s net loss of 12,532 residents.”