April 23, 2018

These Shiny New Buildings Have Everything But Tenants

A report from the Beacon Hill Times in Massachusetts. “Plaguing the commercial and residential districts throughout the city, empty storefronts and vacant apartments are making it seem that Boston is experiencing market failure, despite the strong economy, real estate values and low unemployment rate. In an effort to reverse the trend, Councilor Matt O’Malley of Jamaica Plain and West Roxbury wants to start looking at ways to prod landlords and building owners to rent the spaces out, with one solution being a vacancy fee. Often times luxury buildings over 50,000 square feet are purchased for investment and left empty or are only occasionally inhabited, challenging the city’s effort to create housing for a growing population.”

“‘You see the trickle down affect this has in increasing rents and increasing prices in our neighborhoods,’ said O’Malley. ‘When buildings stay vacant, small businesses can’t find places to rent for home or business and our communities remain less active and less vibrant. It is about affordability as much as it is activating our streets. As more people come to our city we should make sure we are using every tool and every empty property to keep the city affordable.’”

From Northern Public Radio on Pennsylvania. “There’s plenty to see in Pittsburgh’s East End. Another thing you can find: plenty of construction, mostly apartment buildings with signs touting amenities – pools, gyms, rooftop decks. A lot of these shiny new buildings have everything but tenants to fill them. ‘I have passed by apartments where the doors are open and like it’s empty. So I don’t think they’re full,’ said Yazmin Dalsimer.”

“After decades of population decline and stalled development, developers were eager to nab all these well-paid renters. And so began the amenities arms race. The vacancy rates for luxury apartments is around 11 percent. And there are thousands more units being built — many of them in neighborhoods where low-income residents are being pushed out. Those apartments could go empty because of another economic reality of the New Pittsburgh. It has a tech workforce without a tech real-estate market.”

“‘I think all of a sudden, the markets realize that the current housing stock wasn’t meeting what they were looking for,’ said Christopher Briem, a regional economist at the University of Pittsburgh.”

From the Grand Forks Herald in North Dakota. “Vacancy rates, after a years long rise, were at about 8 percent for Grand Forks’ private apartments during the first quarter — and at almost 13 percent across all apartments. John Colter, executive officer with the Greater Grand Forks Apartment Association, said that means landlords have to roll with some economic punches. ‘When you have a vacancy, you have to absorb it and try your best to fill it. (When) 10 percent of your business is lying vacant … it makes it tough to pay the bill on that. You can’t sustain that forever,’ Colter said.”

“The city is coming off the tail end of an apartment boom that saw a building surge, with more than 1,500 apartment units granted building permits in 2013 and 2014, according to city records. Mark Schill, an analyst with Praxis Strategy Group, said the answer to that question — does Grand Forks have ‘enough’ apartments — depends on who you ask. Where a landlord might see too many apartments, tenants might see lower rent, and others might see more disposable income spent in the community. ‘Vacancy has come up, to be sure, and we’re seeing more aggressive marketing of apartments,’ he said. ‘Does that mean with have ‘enough’? Well, that’s a different question.’”

From the Tennessean. “Opry Mills, the land and shopping center by the Cumberland River, was one of about 1,000 high-value commercial properties whose owners successfully appealed the 2017 Nashville reassessment. Those commercial properties accounted for more than 80 percent of the county’s total reduction in assessed value, according to a Tennessean analysis of assessment data. On average, commercial properties valued at more than $1 million, that won appeals, received a 20 percent reduction in assessed value, the analysis showed. These include some of the city’s biggest apartment complexes, hospitals, parking garages and shopping centers”

“The board gave a 22 percent reduction to the owners of Element Music Row, the luxury apartment complex at 1515 Demonbreun St. Element’s owners, a Charlotte, N.C.-based development company called Childress Klein, brought their own appraisal to the board, showing the property’s expected rental income. The board agreed to lower the county’s appraisal from $160.9 million to $125 million.”

From Multi-Housing News on Texas. “Sterling Real Estate Partners has acquired Spring Valley Apartments in Austin. The property, an 11-building, 230-unit apartment community, is the largest asset yet acquired by the partnership. According to RealPage, among the 50 largest U.S. apartment markets, Austin was the only one last year to see a drop in rents, which fell 0.7 percent compared with 2016. RealPage said that new supply in Austin was a factor, with developers completing more than 10,400 units last year, and adding 18 percent to the market’s apartment inventory over the last four years.”

“But the company posited that a stronger factor in pushing rents down might be that Class B and C rents have already gone up as much as the market can bear, climbing roughly 40 percent since 2010.”

From Fox 5 New York. “If you rent a home in New York City, you already know we have some of the highest rents in the country. Now, finally, some promising news: rents are starting to come down a little, according to a report by appraiser Miller Samuel Inc. and brokerage firm Douglas Elliman Real Estate. Manhattan rents dropped 3.8 percent. Brooklyn did even better—rents fell 6.3 percent. And Queens renters got the best deal—rents dropped 6.4 percent.”

“‘Right now is a great opportunity to find a good apartment at a reasonable price,’ said Janna Raskopf, a broker with Douglas Elliman. ‘Landlords are very open to conversations in a way that they hadn’t been historically. The prices are coming down a little bit but the incentives that are being given are what’s doing that and that’s what we call the ‘net effective number. You’re having a lot of owners who are deciding to give—whether it’s their existing tenant or prospective new tenants when the apartments are vacant—opportunities to get some sort of concession.’”

From The Real Deal on Florida. “Responding to the luxury market slowdown, Masoud Shojaee’s Shoma Group is scrapping plans for the multimillion-dollar townhome project Eleven on Lenox in South Beach, The Real Deal has learned. The developer will instead build lower-priced condominiums. He said it was brought on by a tough market, and by buyers demanding discounts on the luxury townhomes, whose prices he had raised from the original preconstruction level.”

“‘The market overall is not ready for $3 or $4 million — it doesn’t matter where it is,’ Shojaee said. ‘You will get a sale here or there on the water for $7 million or $8 million, but it’s very rare at this moment.’ He added that ‘everybody is looking for a bargain. If it’s $4 million, they want to pay $3 million. If it’s $3 million, they want to pay $2 million.’”

“Construction is expected to begin in January 2019 with completion expected by the end of the year. Eleven on Lenox, by contrast, was planned as 11 three-story townhomes, each with four bedrooms, a family room, two-car garage and rooftop deck with a pool and summer kitchen. Shojaee said he had tried raising prices on units from $2.9 million to $3.3 million, and from $3.5 million to $4 million. ‘The problem was they wanted to pay the original prices and we refused to do that,’ he said. He added, ‘I don’t want to give it away.’”

“The project is the latest in a series of South Florida developments to be changed, placed on hold, canceled or delayed amid the slowdown in the condo market.”

From WOSU Radio on Ohio. “Tyvek homewrap flaps over the unfinished wooden beams of the Luxe Belle, as a sign proclaims ‘Now Leasing.’” Another sign entices the first 20 renters with free Taco Bell for a year, a tie-in with the fast-food chain that will occupy the mixed-use development’s first floor. Right now, though, that first floor is just a large concrete atrium. Like four other luxury apartment complexes near The Ohio State University, this six-story development at North High and 8th Avenue is set to open next fall.”

“Local developers are building it–will students actually come? For junior Kiersten Ahrens, who’s still searching for housing for next year, the answer is a definitive ‘no.’ ‘I would love to live them. They’re in great locations,’ Ahrens says. ‘But it’s just so expensive, it’s not even worth it.’”

“Indeed, rents for the swanky complexes can top $1,500 for a one-bedroom. Managers like Tom Heilman, with Hometeam properties, still think the market is there. ‘Let’s just say they’re $1,000 beds when the market’s used to $500 a bed, but you’re getting High Street locations and views, you’re getting amenities, you’re getting granite countertops, flat screen TVs, low utilities, safety, workout areas, and all the other amenities,’ he says. ‘And it’s just a fun experience for students that may are gonna experience this for a year or two and the parents are more than happy to do that.’”

“Occupancy rates for Hometeam’s two new properties on Lane Avenue - Wilson Place and The Point - are just now reaching 50 percent for next year. Another developer, Edwards Communities Development Co., reports similar numbers for a tower under construction at 15th and High.”

“Student Kiersten Ahrens’ current place falls under the $600 cap she and her parents agreed on. ‘This place has everything I need,’ Ahrens says. ‘And yeah, it’d be nice to have a fitness center and a pool and stuff, but they literally say all the time, like, ‘You’re in college, you need the college experience, you don’t need to be living like that when you’re in college, you need to save up and do that later on.’”