The Wall Street Journal looks at how student housing developers are adding retail, restaurants and hotels into the mix:
Now some developers are transforming student housing yet again, this time adding restaurants, shops and hotels.
The changes reflect a desire among students for services close at hand. “In addition to wanting to live close to campus, students also increasingly seek convenient access to restaurants, coffee shops and other retail stores,” said Brian Veith, assistant director of student housing for the National Multifamily Housing Council in Washington. “Developers are responding to student demand.”…
“Given the right fundamentals and consideration to the creditworthiness of the retail/commercial component, these assets will attract significant buyers that will likely pay a premium for the asset,” said Dorothy Jackman, managing director of the National Student Housing Group at Colliers International.
Sterling Frisco, for example, sold for $223,744 per unit. That is a considerable premium above the average price of $144,160 per unit reported by Real Capital Analytics for student-housing properties sold for $2.5 million or more in the U.S. during 2014…
Judd Bobilin, president and chief executive officer of Atlanta-based development-and-management firm Chance Partners LLC, said that student-housing developers in the past “didn’t want anything to do with retail” because they didn’t want to mix asset classes, which can make projects harder to finance. But now he is seeing mixed-use in about 20% to 25% of the assets being developed.
Since acquiring the site early last year for $584.2 million, CoStar has spent about $80 million to update the technology and expand its scope, deploying thousands of researchers to visit and photograph 400,000 rental properties. It even charters airplanes to circle cities in search of leads on new construction.
The site was quietly relaunched last week. Next month, CoStar will unveil a $100 million marketing campaign featuring actor Jeff Goldblum as an eccentric Silicon Valley executive touting the new Apartments.com as a “game-changer.”
The stakes in the ILS sector are high and the competition is heating up:
At the same time, landlords are spending more to advertise their apartment buildings online. According to Kip Cassino of Borrell Associates Inc., which tracks ad spending, landlords will spend $1.5 billion online in 2015, up from $630 million last year.
Not surprisingly, the competition for those marketing dollars is growing. Apartments.com competes on the national level with Zillow Group Inc. and Craigslist Inc., as well as with dozens of local sites in major cities across the country. Seattle-based Zillow, a dominant player in listings for single-family homes through Zillow.com and Trulia.com, a recent acquisition, has been buying up rental-focused listing sites for several years. Purchases have included HotPads, PostLets, RentJuice and New York-focused StreetEasy.
The rest of the article contains some interesting numbers, including what kind of revenue CoStar expects to earn on its Apartments.com property in coming years, and it also focuses on the fragmented nature of the current ILS market. Interestingly, it doesn’t mention many of the players in the apartment market like Apartment Guide, Apartment Finder and ForRent, but does mention Zillow, Craigslist and Move.com. I expect we’ll hear from our friends at the Guide, the Finder and ForRent soon in response to this.
At its annual meeting on February 24 the Downtown Winston-Salem Partnership outlined how Winston-Salem’s downtown has been revitalized over the last 15+ years:
The nonprofit group listed 88 downtown investment projects since 2000 that have either been completed, are under way or for which a firm commitment has been made.
The combined capital investment value is $1.23 billion, topped by the $106 million spent on Wake Forest BioTech Place and the $100 million commitment by Wake Forest Baptist Medical Center toward a major medical education facility. Both buildings are in Wake Forest Innovation Quarter.
The investment is divided into eight categories: health and technology (eight projects, total $445.4 million); infrastructure (10 projects, total $188.4 million); institutional and public development (15 projects, total $181.6 million); residential (15 projects, total $140 million); multiple use (eight projects, total $95.1 million); office (five projects, total $88.4 million); arts and entertainment (five projects, total $50.3 million); and commercial (22 projects, total $42.2 million).
The Nissen Building, a PTAA member, was the largest residential project at $32 million, although far from the only project downtown – Winston Factory Lofts, Plant 64, Hilltop House, The Gallery Lofts, and Link Apartments Brookstown to name just a few. The transformation of the former Reynolds HQ building into a Kimpton Hotel and apartments has recently captured the city’s imagination as well as the soon-to-open Mast General Store project that will add another marquee destination for the downtown. In other words the revitalization shows no signs of slowing down.
Meanwhile over in Greensboro the entity charged with leading its downtown revitalization, Downtown Greensboro Inc, is going through a transitional phase and is looking for a new leader. That’s important because there are several projects in the works that will alter downtown Greensboro significantly over the next few years and it’s essential that there be someone at the wheel who can bring together the various constituencies – city government, elected leaders, industry, educational institutions, etc. – and provide a strategic direction for downtown redevelopment. If Greensboro can manage to bring some strategic direction to the downtown then we’re sure to see even more apartments developed in the downtown area in addition to those like Greenway at Fisher Park, CityView and the Southeastern Building.
As for High Point, well they have a new mayor, lots of new city council members and a new city manager and one of their primary tasks is figuring out how, and where, to revitalize their city. With the furniture market they do have a unique challenge so it will be interesting to see how things evolve there.
These are indeed interesting and (finally) dynamic times in the Piedmont Triad.
Phillips Management Group’s Kevin Phillips was named to the Triad Business Journal’s “40 Under Forty.” You can read TBJ’s full profile of Phillips here, but here are a few interesting tidbits:
Favorite sports team? Tar Heels
As a youth, what was your first job? Renovating apartments
What do you know how to make? A damn good breakfast
A fun fact people may not know about you? I’ve run marathons.
Apartment REITs enjoyed a booming 2014, but according to this Wall Street Journal article they may be set for a bust:
But in the last month, investors and analysts have cooled to the sector. REIT total returns are a negative-1.7% so far in February, with apartments stocks returning a negative-1.1%. A handful of analysts have downgraded the apartment sector on fears it is overvalued and won’t generate the growth in revenue it posted last year.
“The problem is that the stocks are a bit more expensive, and you’re getting slower growth,” said Haendel St. Juste, a REIT analyst with Morgan Stanley. A year ago, Mr. St. Juste says, most REIT stocks were trading at a discount of between 10% and 15% of the value of their assets. After last year’s rally, most are now trading at a premium of 10% to 15%.
And there’s concern that too many units are being built:
Builders in the past six months have started construction on new multifamily apartments at an average pace of 357,000 units a year, 26% more than the 30-year average, according to Evercore ISI. The investment bank predicts negative demand, or a rise in vacancy rates, for apartments over the next year for Houston, Washington, Charlotte and Austin, Texas. “Overbuilding concerns will remain a focal point for REIT investors over the next few years given the current pace of permit activity and new starts,” says Steve Sakwa, an Evercore REIT analyst.
But not everyone is bearish on the apartment market:
Industry association NAREIT estimates that there is enough pent-up demand to fill roughly 3 million units, which is more than the development pipeline.
“People are living with parents, living with roommates,” said Calvin Schnure, NAREIT’s vice president for research. “It’s uncomfortable.”
It’s not like you need an excuse to go to the greatest apartment show on Earth – the National Apartment Association’s Annual Education Conference - but here are three more reasons you should register now:
- Even though NAA just raised the registration price to $825 you can get them from PTAA for $575 – that’s a $250 savings! To register simply fill out our registration form and email it to us and we’ll get you set up.
- Most of us have never seen former Tonight Show host Jay Leno live, so now’s your chance. NAA recently announced that Leno will be the keynote speaker for the conference which should make for a GREAT general session.
- It’s Vegas! Inexpensive airfares, inexpensive rooms and tons of convenient flights and this will be the last time NAA is in Vegas for probably ten years.
And here’s a little reminder of exactly how spectacular Vegas is at night:
The Wall Street Journal has a story in today’s paper (2/9/15) about the continuing rise in percentage of renters in America’s largest cities:
Renters made up the majority of the population in cities at the core of nine of the nation’s 11 largest metro areas in 2013, a sharp change from 2006, when renters were the majority in just five of those cities, according to a new report…
But the report, scheduled to be released Monday by New York University’s Furman Center and Capital One Financial Corp. , found a significant shift in the proportion of renters in all major cities—even in lower-density, relatively inexpensive places such as Houston and Dallas.
A resulting demand for apartments is rising so fast that it is starting to overwhelm supply in many cities, which is pushing up housing costs nationwide…
Among the 11 cities, Philadelphia had the smallest percentage of renters in 2013, just 44%, up from 37% in 2006 and 33% in 1970. Nationwide, 64% of households were own-occupied and 36% were renter-occupied at the end of 2014.
In the short term, economists and developers said they expect to see the percentage of renters continue to rise in most cities.