Apartment Occupancy Highs Continued in August

Well, the apartment market is still on a tear. From Multifamily Executive‘s reporting on Axiometric’s report:

August tallied an effective rent growth rate of 5.1%, which was the seventh straight month that rent increases came in above 5%. That growth rate was an eight basis-point decline from July, but well above the August 2014 mark of 4.1%. 

The year-to-date growth rate hit 5.7% in August, which was the highest mark since the recession. Axiometrics cautions that this number could decline in coming months since it fell in September and October of previous post-recession years.

Helping push rents was occupancy, which hit 95.4% in August. That was the highest rate since at least April 2008 and the sixth straight month the rate was 95.0% or higher.

“As apartment occupancy continues to increase, landlords don’t need to offer as many incentives to fill their vacant units,” said Stephanie McCleskey, Axiometrics’ vice president of research in a press release. “The national concessions rate the past two months has been the lowest since the Great Recession. August’s 0.5% rate was the equivalent of $5.80 per month discount.”

PTAA Members Helping End Homelessness in Guilford County

Earlier this year PTAA was approached by Partners Ending Homelessness (PEH) to see if we could help them in their efforts to end veterans homelessness in 2015 and all chronic homelessness by the end of 2016. Our role is to make our members aware of the program and to help explain to them how they can get involved. Three of our member companies (that we know of) are already working with PEH – Blue Ridge Property Management, Phillips Management Group and Alliance Management – but we’re hoping to get many more.

The members who have heard about the program have all asked some basic questions about the program, and without getting into all of the nitty-gritty what we can tell you is that:

• PEH is not looking for handouts. They are looking for property owners/managers who will work with them by being flexible with regards to credit histories and some aspects of criminal background checks.
• The program will pay up to fair market rent. The organization is sponsoring the client resident so there is not a risk of default by the individual resident.
• Caseworkers actively manage each resident. That means your onsite manager will NOT have to actively manage the resident’s situation and WILL have a resource in case any situation does arise.

If you have vacant units that you think could be a fit for the program please let us know. The easiest thing to do for now is to email PTAA Executive Director Jon Lowder and he will put you in contact with PEH. We would welcome any help you can provide in housing any of the 32 homeless veterans in Greensboro before the end of 2015, and in ending all chronic homelessness in 2016.

FYI, here’s a link to a story that News Channel 14 (Time Warner news) ran yesterday about the program and below is a video of the interview.

Housing Affordability a Growing Issue

According to a new study on housing affordability the combination of stagnant wage growth and accelerated rent growth is likely going to result in an increase in households that spend more than 50% of their incomes on rent. From a story in Bloomberg News:

The number of U.S. households that spend at least half their income on rent—the “severely cost-burdened,” in the lingo of housing experts—could increase 25 percent to 14.8 million over the next decade. More than 1 million households headed by Hispanics and more than 1 million headed by the elderly could pass into those ranks. Households shouldn’t spend more than 30 percent of income on housing, by the general rule of thumb…

There were 11.2 million severely burdened renter households in 2013, competing for 7.3 million units affordable to them, the report said. If rents continue to rise faster than wages, the number of households spending more than half their income on rent will rise, too. Wages grew 0.2 percent in the second quarter of this year, the slowest pace since 1982.

“The economy alone is not going to solve this problem,” said Andrew Jakabovics, senior director of research at Enterprise Community Partners, in a conference call to discuss the findings. “It brings us back to the need to expand affordable housing,”

Winston-Salem City Council Approves Aid for Mixed Use Development

The Winston-Salem City Council approved, by a 7-1 vote, aid for a mixed use development near BB&T Ballpark that will include 250 apartments. From a story in the Winston-Salem Journal:

Brand Properties Real Estate Investment Group will build 250 luxury apartments on land to the northeast of the ballpark, along with 50,000 square feet of retail space that would include a grocery store.

The $53 million investment by Brand would create a project bringing in about $300,000 in annual tax revenue to the city, although that money and more will be needed to make the payments on a parking deck the city would build to bring in the Brand investment.

The city contribution in the form of a 510-space parking deck would be built by Brand and sold to the city for $8.3 million. The city would finance the purchase at a 4 percent interest rate over 20 years, with the city making about $610,000 in annual payments over that period.

Some council members expressed concern that the first phase of development does not include more affordable workforce housing, but Brand has stated that it will included workforce housing in the second phase of the project.

Two Large SFH Rental Home Providers Considering Merger

Two large single-family rental home providers are considering merging, yet another indication that the rental market isn’t cooling off any time soon:

Two big owners of single-family rental homes said Monday they have agreed to merge, a bet that rents will keep rising and homes will remain difficult for many Americans to buy.

Starwood Waypoint Residential Trust, a publicly traded real-estate investment trust run by Barry Sternlicht, the longtime real-estate investor who is Starwood Capital Group’s chief executive, will combine with closely held Colony American Homes Inc. in a deal that values Colony at about $1.5 billion based on Starwood Waypoint’s closing share price Friday. The Wall Street Journal had reported the deal earlier Monday, citing people familiar with the talks…

The two companies own a combined total of more than 30,000 homes valued at nearly $8 billion. Messrs. Sternlicht and Barrack were part of the rush by big investors to buy foreclosed homes in bulk, often sight unseen and at steep discounts, after the U.S. housing market collapsed…

The proposed merger of Starwood Waypoint and Colony is a bet that the percentage of Americans who own homes will remain unusually low. While the foreclosure crisis has receded, toughened lending standards have pushed millions of Americans out of the homebuying market…

The U.S. homeownership rate is at its lowest level in nearly 50 years, falling to 63.5% in the second quarter, according to the Commerce Department.

In contrast, single-family rentals now add up to 13% of overall housing stock, up from 9% in 2005, according to a report by Moody’s Analytics.

PTAA and Goodwill of NWNC Maintenance Job Placement Program Pays Dividends

For the past few years PTAA and Goodwill of NWNC have been partnering to make NAA’s CAMT designation a central part of the maintenance program that Goodwill and Forsyth Technical Community College developed as one of their job training programs. A couple of times a year PTAA and Goodwill team up to host a job fair so that PTAA members can meet graduates of the program as well as other qualified candidates identified by Goodwill.
On the morning of August 19, 2015 one such job fair was held at Goodwill and so far the results have been impressive: five maintenance technicians and one maintenance supervisor were hired by participating PTAA members. Considering that these job fairs are fairly small this kind of result is very impressive and highlights the value of having a highly targeted event that focuses on quality versus quantity.

As most people in the local apartment industry are aware, the maintenance tech position is one of the hardest to staff given that there’s often a great deal of turnover and the candidate pool is very limited. PTAA’s partnership with Goodwill of NWNC is a critical component of our efforts to help address this issue for our members. If you would like more information, and in particular if you would like to be notified directly the next time we schedule a job fair, please contact Carrie Langley at 336-294-4428.

Two Major Home Builders Bullish on Apartments

Toll Brothers and Lennar, two of the largest US home builders, are digging deeper into apartment development:

Upscale builder Toll Brothers Inc. has said it intends to expand its apartment-development division, a three-year-old venture that so far has focused on the Boston-to-Washington, D.C., corridor, to build projects across the U.S. In all, Toll plans to double its equity investment in the division to up to $300 million.

Rival Lennar Corp. in July said it has recruited sovereign-wealth funds and institutional investors to create a $1.1 billion fund for building and holding apartments in up to 25 major U.S. markets. Lennar, which will build the fund’s apartments, intends to expand the fund’s equity to $2 billion within a year, executives said.

The apartment market has been a boon for developers and investors so far this decade. Vacancies are hovering near 15-year lows at 4.2%, according to market-research firm Reis Inc., as young adults stay in rentals longer than earlier generations did. Meanwhile, apartment asking rents have steadily risen to a 15-year-high of $1,194 a month in 79 U.S. markets in the second quarter, according to Reis.

“Today we see great fundamentals in the business,” said Rick Beckwitt, Lennar’s president, in an interview. “You have 3 million-plus young adults living at home who want housing, and most of them will rent.”

Other researchers quoted in the article are less optimistic about how long the apartment party might go on, but the fundamentals continue to look strong and it appears that the party isn’t set to end any time in the immediate future.

Office Parks Reimagined As Walkable Communities

Developers are beginning to see suburban office parks as an opportunity to create urban-style communities. From the Wall Street Journal:

The latest example is in Minnetonka, Minn., a suburb of Minneapolis. There, Roers Investments LLC and CPM Cos. want to demolish two vacant warehouses to build a 274-unit luxury-apartment project in the middle of the 600-acre Opus II Business Park.

The $62 million development, which will include a fitness center, rooftop patio, fire pit and underground, heated parking, will feature apartments with monthly rents that range from $1,155 for a studio to $2,520 for a two-bedroom unit.

Adding apartments to corporate parks has numerous advantages for developers, according to Maureen McAvey, a senior resident fellow at the Urban Land Institute in Washington. First, most corporate parks are owned by a single entity, making it easier for developers to aggregate the parcels needed to build. With land increasingly scarce in urban and suburban locations, business parks have an abundance of underused space. Corporate parks also usually have easy access to major highways and mass transit, as well as infrastructure such as roads and utilities, which make redevelopment easier and less expensive.

And converting corporate parks into walkable communities helps increase the property value:

Walkability adds value, even to commercial properties. According to data firm Real Capital Analytics, prices for properties in central business districts have risen 125% over the past decade, but suburban properties that are also considered highly walkable are up 43%. Comparatively, prices are up just 21% to 22% for properties in suburban locations that are somewhat walkable or car-dependent.

Student Housing Providers Adding Corporate Sponsored Perks

As the father of three (three!) college kids I can vouch for the fact that their housing is far different – as in superior – than anything we had back in the dark days of the ’80s. According to this article in the Wall Street Journal their amenities are only getting better:

Big student-housing landlords are joining forces with corporate marketers to ramp up the services they provide to the nation’s 20 million college students.

Many students arriving at their new student apartments this fall are being greeted by corporate promotions ranging from concert invitations to discounts on Uber rides.

The deals typically are structured with little money exchanged between the landlords and companies, although in some cases the landlords pay for the products or services…

Students planning to live this fall at 4th Street Commons, off-campus housing near Florida International University in Miami, got emails with $20 discount codes for Uber Technologies Inc. They also will be able to ride a bike free for up to two hours using the Zagster bike-sharing service, and go to free concerts through a partnership with Interscope Records.

All of this comes at very little cost to the landlord, Florida-based Kayne Anderson Real Estate Advisors, which owns 20,000 student-housing beds around the country.

Of course not all student housing providers are into having these types of partnerships, partly because they aren’t confident they know what will resonate with the students:

While landlords have been under increasing pressure to attract tenants as supply swells, some said they are skeptical of corporate partnerships. That is partly because middle-aged real-estate company executives have little sense of the products a 20-year-old student might consider cool.

I totally get that. I’d wonder why they weren’t excited by a $10 gift card from Cracker Barrel.