Archive for April, 2014

High Rises Coming to a City Near You

From the Wall Street Journal:

Minneapolis isn’t the only place building upward. While the U.S. housing market as a whole may still be creeping back from recession, downtowns around the country are seeing a veritable boom in high-rise apartment buildings.

This year, some 74 rental towers are on pace to be completed, and there are 81 on the books for 2015—the highest number since at least the 1970s, according to Axiometrics, a Dallas apartment-research firm that defines a tower as 15 stories or more. At the same time, strong apartment rents and sluggish demand for office space have resulted in some high-rise buildings being converted to apartments…

The growth in new rental towers—which are usually woven into downtown office centers—is being driven largely by young professionals starting their careers, along with empty nesters who are in some cases downsizing from bigger homes in the suburbs. Together, they are helping downtowns evolve from places centered mostly on working and entertainment to more complete neighborhoods, with grocery stores, community centers and community services.


April 30, 2014 at 8:56 pm Leave a comment

Housing Market Holding Back the Economy?

The New York Times has a piece exploring the impact that the housing market is having on the economy:

Investment in residential property remains a smaller share of the overall economy than at any time since World War II, contributing less to growth than it did even in previous steep downturns in the early 1980s, when mortgage rates hit 20 percent, or the early 1990s, when hundreds of mortgage lenders failed.

If building activity returned merely to its postwar average proportion of the economy, growth would jump this year to a booming, 1990s-like level of 4 percent, from today’s mediocre 2-plus percent. The additional building, renovating and selling of homes would add about 1.5 million jobs and knock about a percentage point off the unemployment rate, now 6.7 percent. That activity would close nearly 40 percent of the gap between America’s current weak economic state and full economic health.

But what about the burgeoning apartment market?

So there is something of a boom underway in the nation’s housing market. It just isn’t for single-family homes.

Building of rental multifamily properties, as the industry calls them — buildings with five or more housing units as part of one construction — was higher last year than it was even at the peak of the housing boom. Some 34 percent of all housing permits issued nationwide were for multifamily properties in 2012 and 2013, the highest since 1984…

On average, it cost $102,000 to build each of those new apartment units last year, according to census data, compared with $224,000 for each single-family home. Moody’s Analytics estimates that every single-family home that is started creates 3.7 jobs over the ensuing year, compared with 1.8 jobs for a unit in each multifamily home.

That’s a pretty common refrain when discussing the economic impact of housing – that apartments don’t generate the same number of jobs as houses – but that doesn’t take into account the ongoing management jobs those apartment communities generate.

A more fundamental question prompted by the article is this: Is a housing model based on the suburban, single family home subdivision what’s best for the country? Sure there are more construction jobs generated per “door” with single family houses than multifamily units, but in the long run do they cost more in delivery of utility service, traffic/sprawl impact and demand placed on municipal services?

April 29, 2014 at 6:56 pm Leave a comment

Piedmont Triad Apartment Indicators Still Strong

Real Data just released their latest Triad apartment report, and while the Triad isn’t the piping hot market that Raleigh or Charlotte is, the numbers still look good. From the Triad Business Journal:

That leaves the region’s apartment vacancy at 6.9 percent, the lowest rate in more than a decade. A year ago, the Triad’s total apartment vacancy rate was 8.3 percent.

Across the region, there are 1,993 units currently under construction and another 2,531 proposed, the report said. As it was in this fall’s report, the most active submarket was downtown Winston-Salem, with 836 units under construction and another 224 proposed.

Average rent in the Triad rose to $710, up 1.6 percent from $699 a year prior. One-bedroom units average $609 rental rates, while two-bedroom rents average $699 and three-bedrooms average $922.

April 23, 2014 at 1:48 pm Leave a comment

Average March Rents for Piedmont Triad Apartment Markets in Bottom 10 Nationwide

According to Axiometrics the Winston-Salem apartment market had the second lowest average rent in the country- $649 – in the month of March. The only market with lower average rent was Tucson, AZ ($633). Greensboro was the eighth lowest at $708 per month in March.

How do these rents compare to the top 10? Well at the very top you have New York at $3,251 and San Francisco at $2,659.

April 17, 2014 at 6:36 pm Leave a comment

NC-based Multifamily Operating Expenses Increase at Rate Lower Than National Average

From the Novogradac Journal of Tax Credits:

Operating expenses between 2010 and 2012 for low-income housing tax credit (LIHTC) properties increased at an annual rate of 2.92 percent between 2010 and 2012, according to a report released by Novogradac & Company LLP, “Novogradac Multifamily Rental Housing Operating Expense Report—Survey and Analysis for LIHTC Properties.” Operating expenses for all multifamily rental properties, including market-rate developments, grew at an annual rate of 2.39 percent during the same period…

But for the region in which North Carolina resides, the news was better:

The fifth fastest growing region was Region 4–Alabama, Florida, Georgia, Kentucky, Mississippi, North Carolina, South Carolina and Tennessee–where total operating expenses grew by 1.37 percent annually. This was primarily caused by large increases in payroll expenses and repair and maintenance expenses, but these were tempered by a large decline in operating costs and management fees. 

Chart: Annualized Growth Rate by Region

April 16, 2014 at 7:47 pm Leave a comment

Winston-Salem’s Innovation Quarter is Part of Wall Street Journal’s Deal of the Week

In today’s (4/16/14) Wall Street Journal, Winston-Salem’s very own Wake Forest Innovation Quarter plays a starring role in the paper’s Deal of the Week segment about the role of historic preservation tax credits in redeveloping mills and factories in North Carolina:

The old plants are worth preserving because they represent North Carolina’s “industrialization at the turn of the 20th century,” said Myrick Howard, president of Preservation North Carolina. “The textile and tobacco industries provided the capital for the rise of our modern banking and energy industries.”

A big user of the tax-credit program is Wexford Science & Technology, a unit of San Diego-based BioMed Realty Trust Inc., BMR +0.66% which has renovated three former R.J. Reynolds tobacco factories in Winston-Salem. The old tobacco factories are part of the Wake Forest Innovation Quarter biomedical-science and information-technology hub, where researchers are working on treatments for smoking-related ailments.

This redevelopment is leading to new apartment communities being developed as well, including one of PTAA’s newest members, Plant 64.

Wake Forest Innovation Quarter in Winston-Salem

April 16, 2014 at 6:41 pm Leave a comment

How Hawthorne Grew

The latest issue of Triad Business Journal has an interview with Hawthorne Residential Partners’ chief investment officer, and PTAA board member, Phil Payonk about how Hawthorne has grown to manage 17,555 units in 76 properties since its founding in 2009. From the interview:

What is the appeal of apartments?

The short-term and long-term fundamentals for apartments look good — there’s some construction coming online, and demographic trends in the U.S. show a tendency to rent for longer as you come out of school. You even see an older generation beginning to downsize and look to renting rather than owning a home…

What is Hawthorne’s core business?

Finding stabilized apartment properties that aren’t performing to their fullest potential. We handle the overall development of a site and the property, but we utilize a general contractor to handle the construction. We’ve partnered with several different builders; we like to utilize the small, local guys to kind of help keep costs down. Now, of our 17,555 units, Hawthorne and its partners have an ownership stake in about 45 percent of those. The balance is owned by a third party but managed by Hawthorne…

The Triad has seen a lot of apartments come online very quickly. Do you think it’s approaching over-built status?

We’re seeing in North Carolina markets in particular that a lot of the supply is being absorbed. As long as we see that at a measured pace, we’re going to hopefully not see too many problems. Even though there’s been a lot of product coming online, it’s been pretty hard to get a loan. The banks have the appetite, but there’s just a lot that has to go into it, from documentation and planning and identifying the site and getting everything together to getting a commitment and a building.

April 16, 2014 at 3:24 pm Leave a comment

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