A Bubble Of Its Own Making
A report from the Colorado Springs Gazette. “Colorado Springs-based Griffis/Blessing Inc. has paid $20.3 million for the 108-unit Pines at Broadmoor Bluffs apartments on the city’s southwest side - a record high per-unit price. Griffis/Blessing’s per unit price of nearly $188,000 eclipsed a previous record set this year when the Commons at Briargate complex sold for about $170,000 per unit, according to Apartment Insights. Its rents averaged $1,543 a month in the third quarter. The apartments were built in 1987. ‘The apartment market, starting in 2010, has just gained momentum and gained momentum,’ said Doug Carter, a Springs broker, ‘There are record prices happening in Denver, record prices happening in other markets. Whether it’s volume or whether it’s prices or the amount of construction, it’s just unprecedented.’”
The News & Observer in North Carolina. “A year ago, the Triangle apartment market appeared to be cooling after an extended run of impressive rent growth. With a surge of new units coming on the market, rent growth was flat or down slightly across most types of apartments. But 16 months later, the market is taking off again, according to new data from MPF Research. Such growth is remarkable considering that it is outpacing the rate at which the Triangle is adding new jobs, and also comes at a time when wages for most workers are stagnating. Some see the apartment market as the next likely real estate bubble.”
“‘Folks in this millennial, college-graduate set as well as folks in the workforce housing set are ultimately rent-sensitive because wage growth has stagnated,’ said Todd Williams, senior vice president of investments for Grubb, which owns several apartment communities in the Triangle and has several more under development. ‘Even though we’re seeing big rental rate growth, I think that will eventually cap or mitigate just because fundamentally people won’t have the income to afford it.’”
WABE on Georgia. “The city of Atlanta has been experiencing a boom in the luxury apartment sector – think stainless steel appliances, quartz countertops, hardwood finishes, on-site gym and saltwater pools. According to one study by CoStar Group, nearly every apartment unit that came on the market between 2012 and 2014 fell into the luxury category. As of this summer, there were more than 11,000 apartments under construction and another 11,000 proposed, according to consulting firm Haddow and Company. The vast majority of those fall in the luxury category says Georgia Tech professor Dan Immergluck.”
“‘There’s essentially no new low-income housing development,’ says Immergluck, who studies housing and real estate markets. ‘There’s also very little for moderate income folks.’”
“After 30 years in the Atlanta apartment rental business, Schrager says the last few years have been unlike anything he’s seen. ‘In the past five, six years, the quality of finishes has ratcheted up dramatically,’ says Tim Schrager, the CEO of Atlanta-based development firm Perennial Properties. ‘What you’re seeing in apartments now is the equivalent of what you would have found in high-end condos 10 years ago.’”
“Schrager says developers default to luxury units right now because land costs, architects and labor are at an all-time high. ‘It’s costing X number of dollars just to put a shovel in the ground and start a project, so for the little bit of incremental cost to build that A-quality property, it’s worth it,’ he says, adding that people in Atlanta will probably have to get used putting a bigger portion of their earnings toward rent, like those in New York, Boston and other major cities.”
“That doesn’t mean Schrager isn’t concerned at the sheer number of luxury properties being built. ‘We can’t sustain it. I really believe that to be the case,’ Schrager says. ‘We cannot continue to raise rental rates every year at the rate we’ve been raising them and expect people to afford them. So something has got to give.’”
The Business Observer in Florida. “In Pasco County, for example, rents spiked by 60% between 2001 and 2014, according to a leading rental research firm. That surge has prompted developers and investors to propose new projects and bring new units online — especially in urban areas — at a rate not seen since the 1970s. But with rent increases crushing gains in both inflation and wage growth, some analysts are questioning whether the multifamily sector is inflating a bubble of its own making.”
“‘I’m worried about a bubble and a glut of new properties,’ says John Michallidis, president and CEO of Real Property Management of Sarasota & Manatee, which manages rentals from Parrish to Punta Gorda. ‘Builders are chasing money today, but I wonder how much they’re considering what the market will be down the road. The question we have to ask is how much is the dog chasing its tail?’”
“Statewide, nearly one third of all renters pay 50% of their incomes for housing, and that figure is expected to rise by another 10% or more by 2025. ‘This is going to get worse,’ says Angela Boyd, managing director of Make Room, an Enterprise awareness campaign. ‘We’re not going to be able to build our way out of this crisis, either, because primarily what’s being developed are luxury apartments.’”
“For the time bring, at least, apartment developers don’t seem overly concerned that rent spikes are going to price a significant number of renters out. That’s why in 2015 alone, more than one-third of all housing starts are multiunit in nature, the highest percentage since 1973, according to the National Association of Home Builders. A series of rentals are also scheduled for completion from Tampa to Naples that will add an estimated 10,000 new units by the end of 2017.”
“‘There’s no reason to foresee huge vacancies anytime soon,’ Michallidis says. ‘People are coming here from out of state and out of the country. People want to be here, and with the trendlines, they want to be more mobile. I don’t think that five years from now there’ll be any abandoned properties.’”
I don’t think that five years from now there’ll be any abandoned properties.’”
‘There are record prices happening in Denver, record prices happening in other markets. Whether it’s volume or whether it’s prices or the amount of construction, it’s just unprecedented’
‘What you’re seeing in apartments now is the equivalent of what you would have found in high-end condos 10 years ago.’
‘Schrager says developers default to luxury units right now because land costs, architects and labor are at an all-time high. ‘It’s costing X number of dollars just to put a shovel in the ground and start a project, so for the little bit of incremental cost to build that A-quality property, it’s worth it’
A poster asked the other day, ‘why aren’t developers building affordable housing?’ It’s becoming clear it is the price of land. From Bozeman Montana to Perrysburg Ohio to Omaha Nebraska, the price of land has skyrocketed in the past three years.
Rental watch and I were posting about this within the last 6 mos or so - mostly due to high regulatory fees, tap fees, land development fees and who knows what other ‘fees’ have been added to make an acre of land ‘buildable’.
RW - care to chime in here?
Stay out of debt, don’t have kidz, live below your means, don’t rent in bubble cities (or just avoid bubble neighborhoods in bubble cities) and you’ll have no problem affording the rent.
The majority of circumstances that lead to people not affording the rent are a result of voluntary choices and behaviors.
‘Construction workers are putting the finishing touches on a new luxury apartment complex in the Houston Heights. Trammell Crow Residential recently held a grand opening for Alexan Heights, a new 352-unit apartment complex. Trammell Crow Residential went to great lengths to ensure its latest project in the Heights complements the historic neighborhood. Alexan Heights has an upscale, “industrial-chic” look.’
‘Alexan Heights offers an 80-20 percent mix of one- and two-bedroom units, which average about 850 square feet. The units, which average 850 square feet, feature high-end amenities such as Whirlpool gas ranges and oversized refrigerators; energy-efficient LED lighting; wood and glass cabinetry; hardwood floors; granite or quartz countertops; walk-in closets with wood shelving; patio space; and wine chillers in some units.’
‘Monthly rents range from $1,500 for a 630-square-foot one-bedroom unit to $2,858 for a 1,368-square-foot two-bedroom unit.’
‘Building amenities include a fitness center with Matrix equipment and high-end spinning bikes; a residents lounge;business center; a demonstration kitchen; and a large interior courtyard with outdoor grills, bar areas and a resort-style pool with cabanas featuring individual fans and refrigerators.’
‘Alexan Heights is 45 percent leased after leasing began in April, and is 35 percent occupied after move-ins began in May. So far, Alexan Heights has drawn young working professionals and some empty nesters, Davis said. Trammell Crow Residential is building another luxury apartment project in the Heights, across the street from Alexan Heights. The developer began construction in February on Alexan Yale Street, a midrise apartment that will feature 378 units and a 1-acre dog park.’
‘The developer also has several Alexan-branded project in the works around Houston.’
Luxe seniors housing communities are setting a new standard in Dallas
“Units in the high-end seniors apartment community start at about $3,200 a month for an 800-square-foot one-bedroom.
That rent includes a meal allowance in the project’s restaurant; use of the fitness center with indoor pool, equipment room and programs; weekly housekeeping; and transportation services. Utilities except for phone, television and Internet are also included.”
http://www.dallasnews.com/business/residential-real-estate/20151029-luxe-seniors-housing-communities-are-setting-a-new-standard-in-dallas.ece
‘New numbers show downtown Cleveland’s rental market continues to show strength. The Downtown Cleveland Alliance’s quarterly market update out on Monday will show downtown apartment rentals have a more than 97 percent occupancy rate, up from 95 percent the last quarter, despite adding more than 320 new apartments to the area.’
“We literally can’t build them fast enough downtown.,” Deemer said. “The millennial generation and the boomer generation are both seeking out really dynamic, walkable urban places.”
‘Several construction projects are picking up steam. Construction of a hotel and luxury apartments inside the Schofield building at East 9th and Euclid are nearing completion.’
‘The root of Sydney and Melbourne’s housing crisis: we’re building the wrong thing’
‘Because few families can afford detached housing in the inner and middle suburbs, more are being pushed into the outer suburbs and the fringes of Sydney and Melbourne. It is still possible to find such affordable housing in the outer and fringe suburbs of Melbourne, but not in Sydney. A detached house costs a minimum of $600,000 even in the remotest corners of Sydney. The only affordable option for most of these home seekers is a unit in these outer suburban locations.’
‘There is no short term fix. In the long term more resident and migrant families are likely to seek affordable housing elsewhere, or in the case of migrants, may by-pass Australia altogether. Those who choose to stay will have to make adjustments to their life-style as by delaying starting a family.’
‘On the other hand, a glut of high-rise apartments is inevitable, although it is being masked by the long lead time in the completion of newly approved apartment projects. This is because the recent surge in approvals is way above the need for such dwellings. This is especially the case in Melbourne. The apartments being approved are predominantly tiny 60 square metre or smaller dwellings with no access to protected outdoor space. They are totally unsuitable for raising a family. They are tiny because most investors prefer to buy at prices below $600,000.’
‘The first of three big new apartment buildings planned on the northern edge of Jamaica Plain opens this week, testing demand for downtown-style high-end rentals in the fast-changing neighborhood. Tenants began moving in Sunday at Olmsted Place, an $84 million, 196-unit building developed by Boston Residential Group. The building they’re moving into is unlike any other on this stretch of South Huntington Avenue.’
‘The Olmsted, not far from the booming Longwood Medical Area, has all the bells and whistles of a modern luxury apartment building: a hip lobby, a doorman, a dining room that residents can reserve, plus a vast pool deck overlooking Olmsted Park.’
‘It’s charging rents to match: Three-bedrooms top $5,000 a month, and studios start at $2,600.’
Jamaica Plain= dead honkey
Dead honkey? No way, JP is overrun with PBR-drinking, gluten-free-kale-eating unkempt douchebags. A few years back they even closed the discount grocery and opened a Whole Foods (f– WF). These apartments are for all the doctors at Longwood. It’s a f–ing insane price, considering you can buy a nice house nearby and pay less in mortgage.
Note too that doctor’s salaries in Boston are lower than in just about any place in the US that you can name, and have been declining for years (numbers flat, workload growth insane). They might get some MDs who have to choose between spending their evenings on the horrific commute in and out of JP, or spending them writing up the patient data they’ve collected for insurance companies during the day so they can eventually get paid. But as a fundamental proposition the luxury-digs-for-docs bet is unhinged from reality. Will be curious to see what happens to asking rents in a year.
JP is pretty safe these days. Basically since 2000 most of the ‘bad’ neighborhoods in Greater Boston are gone, except Dorchester and Roxbury.
Neighborhoods like JP, Roslindale, East Somerville, etc are gentrified now. Low crime and high rents.
‘Southwest Florida’s rental crunch is poised to get some much-needed relief. Crews have begun clearing trees from a 32.5-acre tract of vacant property along Cattlemen Road, where 360 apartment units are planned.’
‘The complex is the latest in a rush by multi-family developers to meet the soaring demand for affordable leases. Rents in this area are climbing, and vacancy numbers are among the lowest in the nation.’
‘The market rate for a basic three-bedroom rental in Sarasota and Manatee counties has grown to $1,368 — making this area among the priciest in Florida, according to industry researcher RealtyTrac Inc. Rental occupancy rates top 90 percent in most parts of Southwest Florida.’
“We have seen a really tight market the first half of the year,” Scott Corbridge, property manager with Sarasota Management and Leasing. “But we have recently seen a glut in the larger, $2,000-a-month rentals, although we continue to see a big demand for $1,500 and under. . . . When you think of jobs coming into this area, most are in the range.”
‘Vacancy rates have increased in Regina from 3.0 per cent in October 2014 to 5.3 per cent in October 2015, according to preliminary data from Canada Mortgage and Housing Corp. (CMHC) released Monday. Saskatoon saw vacancy rates jump from 3.4 per cent to 6.5 per cent during the same period, while Saskatchewan vacancy rates have increase from 4.1 per cent to 6.8 per cent, thanks largely to the slump in the oilpatch.’
‘Goodson Mwale, senior market analyst for CMHC in Saskatchewan, said the economic slowdown due to low oil prices is mainly responsible for the rising vacancy rate in the province.’
“Definitely, the oilpatch (has had an impact),’’ Mwale said. “There’s an issue of softening of rental demand due to the economic environment and what’s happening specifically with lower oil prices has impacted those areas (like Estevan, Weyburn, Swift Current and Lloydminster).’’
“Demand is one side of the coin; the other side is supply,’’ Mwale said. “We’ve seen quite a bit of rental (housing) starts in Regina in the last couple of years. In 2014, we had 803 apartment rental (housing) starts. So far, in the first nine months of 2015, we’ve had 561.’’
‘From July 2014 to June 2015, the number of rental units completed was 703 in Regina; in Saskatoon, 189 rental units were completed. As a result, the number of new rental suites, primarily apartment-type condos, is exceeding supply in Regina. “There’s quite a bit of product out there. There was a jump (in the vacancy rate) to 3.0 per cent last year. Since then, there’s been more starts, despite the elevated inventory.’’
‘Accordingly, the condo apartment vacancy rate in Regina jumped from 1.2 per cent in October 2014 to 4.6 per cent last month.’
“The rise in the national vacancy rate was due to lower net migration in regions most affected by low oil prices as well as an increase in the supply of purpose-built rental apartment units,” said Bob Dugan, chief economist at CMHC.’
http://www.leaderpost.com/vacancy+rates+jump+cities+province+cmhc+says/11487178/story.html