May 14, 2017

The Glut Of Rentals Will Be Felt In The Wallet, Of Course

A report from the Los Angeles Daily News in California. “If you’re in the market for an apartment, there may be some relief ahead after months of through-the-roof rents. ‘L.A. is going against the current for a change, with rent prices relatively stable and signs of an even better year ahead for local renters,’ said Amalia Otet, communications specialist at RentCafe, which also shows rental units that are available on the market. ‘Demand for apartment living continues to be strong in the city but supply is finally catching up and tempering rents in the process.’”

The Reflector in North Carolina. “The Greenville City Council on Thursday ignored loud objections and obvious signs that the city’s student housing market is saturated when it voted unanimously for a zoning change that will allow for a new 656-bed development on Charles Boulevard. Fred Pierce of Pierce Education Properties said student housing here was at 92 percent occupancy in the 2016-17 Academic Year. The 92 percent figure likely is a conservative estimate considering the state of The Captain’s Quarters, a 1,700-bed complex north of the river.”

“Richard Hart, a principal with ChainBridge Capital, said in another letter to the council on Wednesday that 1,450 beds at the complex were empty this year. The thought of massive vacant apartment complexes worries people. Thousands read Friday’s story about the vote in the paper, on reflector.com and through social media. One Facebook commenter said ‘I am so disappointed and feel like I need to put my condo on the market sooner rather than later.’”

The Columbia Tribune on Missouri. “Cut-rate student housing and a job fair for displaced University of Missouri employees are among the first signs of how budget cuts and declining enrollment will impact Columbia. Landlords eager to lease bedrooms before the semester ended last week were offering gift cards of up to $1,000 or rent reductions worth the same or more to lure renters. They are getting squeezed from two directions – the number of upperclassmen allowed to live off campus will drop by about 1,400 and new buildings a few steps from campus will add almost 700 units to the market.”

“The offers are intended to match or beat the deals other landlords are offering, said Alexander Phillips, CEO of TwinRock Partners. But the company can only cut rates for so long, he added. ‘How strong the school and state will be will determine whether or not we are happy with our investment,’ he said. ‘If they don’t get their act together and drive up enrollment again, we will be licking our wounds.’”

The Tampa Bay Times in Florida. “When Brian Davison announced plans to build up to 78 new condos in downtown St. Petersburg, he revealed another surprise: His company, EquiAlt, plans to ’self-finance’ the project. That could be a smart move. Both nationally and in the Tampa Bay area, businesses are finding it harder to get money from banks these days. Just in the past two weeks, ‘I’ve seen more banks pull back and tread more lightly,’ said Robert Stern, a Tampa real estate attorney whose clients include lenders as well as business borrowers. ‘I have seen local deals not close, or get declined or blow up because of the difficulty of financing.’”

“In Tampa Bay, apartment developers are among those likely to feel the loan squeeze. Thousands of new upscale apartment units have been built since the recession, especially in Tampa and downtown St. Petersburg. And while the bay area has enjoyed strong job growth, incomes have not kept pace so the demand for rentals as high as $3,900 a month could start to wane. Davison said his Tampa company always intended to use private financing rather than commercial lenders to build its downtown St. Petersburg condos. ‘All my co-business people that I’ve seen at cocktail parties in the last year are having difficulties,’ he said. ‘The banks are flat out not lending on something where the cash is not flowing right now.’”

From Bisnow on New York. “Concessions are increasingly becoming the norm in apartments all over New York City, but it is not doing much to stem the tide of the softening market. The impact is being felt more by higher-value assets, another troubling sign. Doorman buildings in Manhattan, which make up about 50% of the multifamily market, had a 3% drop in median rent, the biggest decrease in five years.”

The Cooperator on New York. “Downtown Brooklyn’s housing boom isn’t letting up – but how much new residential construction is too much? ‘It’s like everywhere you turn there’s a new building,’ says Suzanne DeBrango, an agent at Halstead in Boerum Hill. ‘If you travel down Atlantic, you can’t make right turns at all, there’s so much construction. Brooklyn is becoming Manhattan.’ Most of the developments are luxury rentals, DeBrango says, while a small number are condos.”

“In recent months, three new towers have opened – and according to the New York Times, all are facing challenges leasing. The glut of rentals is pushing prices down and forcing landlords to offer freebies and perks, from free months on 12-month leases to no-fee rentals. According to rental listings on StreetEasy, out of 233 apartments for rent in Downtown Brooklyn, 186 are no-fee. And where will the effect of the glut of rentals be felt? In the wallet, of course. DeBrango says it took almost a year to find a renter for a one-bedroom parlor floor rental in a brownstone building with outdoor space in Boerum Hill. The apartment used to rent for $3,000 and the price has since dropped to $2,500. ”

The Fairfax County Times in Virginia. “On the surface, The Cosmopolitan at Reston Town Center appears to perfectly fit its description of a luxury apartment building. However, some tenants say life at The Cosmopolitan does not quite live up to its initial promise. ‘You go on the tour to move in here and…it seems fabulous,’ said Ann Marie Booher, a tenant and board member of the building’s recently formed Tenant Association. ‘…I felt like within three months of living here, a lot of it was just flashy show, and they didn’t live up to that.’”

“‘The in-house management, they want so badly to do whatever they can, but they are very limited,’ Booher said. ‘For me, it seems like it goes back to the character of the parent company and how much they want to penny pinch every little thing.’”




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54 Comments »

Comment by Ben Jones
2017-05-14 08:32:12

From the last link:

‘While some tenants have left in search for other homes, others say they want to stay at The Cosmopolitan, because they want to help fix issues with a property that could be a wonderful place to live if managed better.’

“My husband and I have continued to live here, because we really like the people that live in this building. It is such a wonderful place to live for a sense of community,” Ungerer said. “The prior owners had all kinds of parties and gatherings. Now, they’ve really cut down on that, because Gates Hudson will not pay extra for the management to put on these parties, so we basically do them ourselves.”

Comment by phony scandals
2017-05-14 08:40:59

“Within the first week of her stay at The Cosmopolitan, a tornado siren went off, and she said the building’s staff apparently had no plan for occupants to follow in case of an emergency.”

https://www.youtube.com/watch?v=gGHX_jsuRy0

Comment by Raymond K Hessel
2017-05-14 18:54:02

What’s the contingency plan in case of bankruptcy?

 
 
Comment by SW
2017-05-14 08:51:20

Seems like compressed profit margins are popping up everywhere these days.

 
 
Comment by Professor Bear
2017-05-14 08:50:46

‘Demand for apartment living continues to be strong in the city but supply is finally catching up and tempering rents in the process.’

Eventually, unaffordable rents, a historic movement to convert owner-occupied housing into rental housing, and a massive luxury rental housing building boom had to culminate in a crash in rents.

It’s just amazing how slow the market adjustment process has been.

Comment by Ben Jones
2017-05-14 08:55:00

It’s been slow and fast:

‘Just in the past two weeks, ‘I’ve seen more banks pull back and tread more lightly,’ said Robert Stern, a Tampa real estate attorney whose clients include lenders as well as business borrowers. ‘I have seen local deals not close, or get declined or blow up because of the difficulty of financing’

Comment by Professor Bear
2017-05-14 08:56:41

A banker is a fellow who lends you his umbrella when the sun is shining, but wants it back the minute it begins to rain.

– Mark Twain

Comment by Ben Jones
2017-05-14 09:08:30

This credit event hit NYC 6 or 9 months ago.

‘in another letter to the council on Wednesday that 1,450 beds at the complex were empty this year’

That’s the sound of retirements going up in smoke.

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Comment by azdude
2017-05-14 09:42:21

“The meeting of the turd and fan blade is near.”

 
 
 
 
 
Comment by Senior Housing Analyst
2017-05-14 08:52:46

San Ramon, CA Rental Rates Tank 8% YOY

https://www.zillow.com/san-ramon-ca/home-values/

 
Comment by Ben Jones
2017-05-14 08:53:14

‘the demand for rentals as high as $3,900 a month could start to wane…‘All my co-business people that I’ve seen at cocktail parties in the last year are having difficulties,’ he said. ‘The banks are flat out not lending on something where the cash is not flowing right now.’

Maybe some of the readers here don’t believe me when I say most apartment deals I see would be money losers if financed, but it’s the vast majority. And I don’t even look at stuff in the stupid high markets like Colorado and California. Here’s something that makes the situation all the more remarkable: rents have never been higher. The percentage of population renting has never been higher. And they are losing money! It’s only going to get worse. $3900 for a Tampa apartment?

Comment by b
2017-05-15 16:47:27

welcome to Seattle as well.

They are building all these upscale $4K/month apts downtown. The cascading effect after prices drop will be vacancy to the last generation apt buildings that are only 5-15 years old. The pension funds that own shares in these buildings will suffer

Comment by Carl Morris
2017-05-15 17:01:46

The cascading effect after prices drop will be vacancy to the last generation apt buildings that are only 5-15 years old.

Assuming some new novel way isn’t invented to foam the runways again.

 
 
 
Comment by Professor Bear
2017-05-14 08:54:59

“Cut-rate student housing and a job fair for displaced University of Missouri employees are among the first signs of how budget cuts and declining enrollment will impact Columbia.”

Thanks a lot, Melissa Click.

 
Comment by Ben Jones
2017-05-14 09:10:48

‘It is such a wonderful place to live for a sense of community…The prior owners had all kinds of parties and gatherings. Now, they’ve really cut down on that’

But have they lowered your rent to make up for the lack of Coors Light on Friday night? Buncha barflies.

Comment by Oscar Goldman
2017-05-14 09:18:01

A bunch of nobodys in debt up to the top of their empty skulls pretending to be somebodys…….. they fit the msm narrative though.

 
 
Comment by Ben Jones
2017-05-14 09:19:00

‘How strong the school and state will be will determine whether or not we are happy with our investment…If they don’t get their act together and drive up enrollment again, we will be licking our wounds.’

About a year ago, maybe more, in the same paper there was an article with an apartment guy complaining about the “merchant builders” bringing on too many units. He said these guys who build to sell don’t care about the overall health of the existing market, and he was right. The question is, who was financing this “free for all” as it was put the other day? Why didn’t Alex do a little research before his “investment”? I knew the market was going to end up like this and I’ve never been to Missouri.

 
Comment by Raymond K Hessel
2017-05-14 09:23:29
 
 
Comment by Albuquerquedan
2017-05-14 09:51:09

Vancouver and Toronto account for all the job growth in Canada:

http://www.cbc.ca/news/business/housing-jobs-toronto-vancouver-1.3577061

 
Comment by Ben Jones
2017-05-14 09:55:06

‘it took almost a year to find a renter for a one-bedroom parlor floor rental in a brownstone building with outdoor space in Boerum Hill’

Then they cut the rent 500 bucks. Genius.

 
Comment by Ben Jones
2017-05-14 10:02:49

‘Billionaire real estate investor Sam Zell is pulling no punches on the problems for commercial real estate developers sitting on scores of abandoned former retail sites. “I doubt they can find other viable tenants, other tenants that can generate the type of traffic that a Macy’s or a Sears have historically created,” Zell told TheStreet TV in an interview.’

‘The CEO of Vornado Realty Trust, one of New York City’s largest landlords, echoes Zell’s downbeat assessment.’

‘Steven Roth identified seven fundamental problems with the current retail industry in his recent annual letter to shareholders. “The U.S. is grossly overstored,” he wrote, and “household name” brands have failed “in the anchor and chain store business.”

‘Added Roth, “I do not believe we can grow our way out of this mess,” he wrote. “I believe the only fix for brick and mortar retailing is rightsizing by the closing and evaporation of, you pick the number, 10%, 20%, 30% of the weakest space. This very painful process will surely take more than five years. It will also create enormous opportunity for those with the capital and management platforms to feed on the carnage.”

Comment by Ben Jones
2017-05-14 10:07:30

Am I the only one who gets a feeling that this is being misread?

‘The U.S. is grossly overstored’

This is now obvious, and it doesn’t have anything to do with online sales.

‘the closing and evaporation of, you pick the number, 10%, 20%, 30% of the weakest space. This very painful process will surely take more than five years’

If this is anywhere near true, imagine how many mortgages/bonds/taxes will go unpaid. How many jobs will go poof? And this is on top of the multi-family debacle.

Comment by Oscar Goldman
2017-05-14 10:14:39

And the unresolved SFR debacle.

Comment by Ben Jones
2017-05-14 10:28:03

I just remembered. We don’t have any worries about this because Janet and some other Fed guys warned us about a CRE/multifamily bubble a year or so ago. Never mind.

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Comment by Raymond K Hessel
2017-05-14 15:07:34

Ben, you are clearly misreading this. That smug panel of CNBC commentators has repeatedly assured us that Everything is Awesome! Buy moar stawks!

 
 
Comment by SW
2017-05-14 10:28:38

I’m getting hungry for a feeding.

 
Comment by scdave
2017-05-14 10:36:02

Hey Ben…Here is Vornardo Realty Trust CEO’s letter to shareholders December 16, 2016…Go to page #15 and read in its entirety…Zell and many others have been warning about this for years…The bug may have finally hit the windshield;

https://www.sec.gov/Archives/edgar/data/899689/000089183617000044/ex_99-1.htm

Comment by Ben Jones
2017-05-14 10:53:52

These guys can only do what they can do. It’s the central bank that’s supposed to take away the punch-bowl, and seeing as how Janet warned us, I’m sure they took appropriate actions. Doing otherwise would be unimaginably dumb.

Comment by Professor Bear
2017-05-14 19:03:35

Too many head fakes has resulted in a “central banker cries wolf” problem for the Fed.

When the real wolf shows up, lots of complacent investors who thought the Fed would never again tighten are going to serve as wolf forage.

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Comment by Ol'Bubba
2017-05-14 14:00:06

Sam Zell sold Equity Office to a bunch of Investment Bankers back in 2007. I remember making a mental note of it at the time.

If Sam Zell is selling real estate holdings on a large scale basis, for me that’s a good indicator that we are near the top.

Note to self - sell some of your Vanguard REIT Index Fund shares.

Comment by Raymond K Hessel
2017-05-14 15:09:15

Da Boyz are stealthily cashing out and exiting the Wall Street-Federal Reserve pump & dump before it all comes crashing down.

 
 
Comment by Professor Bear
2017-05-15 03:05:13

More Yellen bux going up in smoke…

 
 
Comment by Senior Housing Analyst
2017-05-14 10:21:48

“Canada’s Housing Bubble Explodes As Its Biggest Alternative Mortgage Lender Crashes Most In History”

http://www.zerohedge.com/news/2017-04-26/canadas-housing-bubble-explodes-its-biggest-mortgage-lender-crashes-most-history

 
Comment by phony scandals
2017-05-14 11:26:51

Here’s what could happen to America’s hundreds of dead malls

Leanna Garfield
May 13, 2017, 11:00 AM

http://www.businessinsider.com/what-will-happen-to-closed-malls-2017-5

Comment by Ben Jones
2017-05-14 11:44:15

‘The number of walk-in clinics in malls rose 15% from 2011 to 2016, according to the Urgent Care Association of America. Last year, Bloomberg reported that a third of all urgent care is now located inside shopping centers.’

Yeah, I want to see somebody run by with blood spurting while I eat my pretzel.

Comment by Albuquerquedan
2017-05-14 11:56:46

You might need urgent care if you eat at the Food Court

Comment by azdude
2017-05-14 12:06:12

walmart is gonna start opening clinics next to the mcdonalds and burger kings.

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Comment by Karen
2017-05-14 15:13:09

I saw a dental office inside a Walmart here in Dallas recently.

 
 
 
Comment by Karen
2017-05-14 15:05:13

Yeah, I want to see somebody run by with blood spurting while I eat my pretzel.

Or, while you eat your taco: http://www.lagranplazamall.com/en-us/

 
 
Comment by Raymond K Hessel
 
Comment by GreenEggsAndSpam
2017-05-14 16:10:39

Talked to a store owner in the main mall in my county yesterday. Mall is half vacant and I asked whats going on, its like a ghost town around here (I always think of that song by the Specials). Anyway, he says there are only a few businesses doing ok including his and yet the owner is raising rents 30%! He said if he gets that he’s gone. He talked to them about trying to bring in smaller businesses, basically do a flea market type deal with smaller vendors but they arent open to anything but big box retailers that seem to last a couple years and then BK (sears, sports authority, payless shoes, pier 1 is probably on deck). In the same vein land owners want so much rent in my county that we have a zillion lunch trucks because no one can afford the rent to set up a permanent space. Charles Hugh Smith nailed it - rentier economy is stripping any wealth from the productive sectors.

 
 
Comment by Ben Jones
2017-05-14 12:23:38

‘L.A. is going against the current for a change, with rent prices relatively stable and signs of an even better year ahead for local renters,’ said Amalia Otet, communications specialist at RentCafe, which also shows rental units that are available on the market.’

https://losangeles.craigslist.org/search/apa?query=free+rent&availabilityMode=0

It’s the same up north:

https://seattle.craigslist.org/search/hhh?query=free+rent&availabilityMode=0

 
Comment by Taxpayers
2017-05-14 12:45:42

Against the current?”
Falling rents are unanimous

 
Comment by azdude
2017-05-14 13:10:56

Basically most of the growth of the past 8 years was based on debt. How can this keep going? keep interest rates low forever?

Comment by Blue Skye
2017-05-14 14:02:29

Growth in what, exactly?

Debt expansion is never limitless, because of the increasing risk of cascading defaults as debt exhaustion is approached. There may be no limit to lending pieces of paper, but there is definitely a limit to repaying out of earnings.

Comment by azdude
2017-05-14 15:25:19

yep doesnt it seem like everyone is just creating credit out of thin air and buying stuff from other countries?

Comment by rms
2017-05-15 22:52:34

Debased currency, trade deficits and foreign wars… and Rome fell.

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Comment by Ol'Bubba
2017-05-14 14:07:37

It’s not just the United States. Take a look at the values on this table:

http://www.tradingeconomics.com/bonds

The yields on Sovereign-issued debt in developed markets is microscopic. In Japan, you need to go out beyond a 7-year term before the yield gets out of the negative range.

We could be in for low rates for a long, long time.

Comment by In Colorado
2017-05-14 21:29:49

Every government in the world is up to its eyeballs in debt. If rates go back up to historic levels we will see the mother of all defaults.

 
 
 
Comment by phony scandals
2017-05-14 18:02:20

Joe Cocker - She Came In Through The Bathroom Window

https://www.youtube.com/watch?v=bkdjMxTdrU8

Comment by Blue Skye
2017-05-14 18:19:32

Didn’t anybody tell her?

Comment by phony scandals
2017-05-14 20:44:29

Didn’t anybody see?
Sunday’s on the phone to Monday
Tuesday’s on the phone to me

Read more: Joe Cocker - She Came In Through The Bathroom Window Lyrics | MetroLyrics

 
 
 
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