Thursday, June 26, 2014

City Plans to Reduce Future Apartment Density in East Portland

City officials propose to decrease existing density allowances for about 935 acres in east Portland — effectively limiting the amount of potential new units built in a part of town that largely still lacks sidewalks. 

The downzoning is targeted to residential neighborhoods along Southeast 122nd Avenue and 136th Avenue, an area targeted for high density in a plan set out in 1996.  

Read more.

Developers Say Changes Needed to Affordable Housing Incentives

Apartment developers in the Portland metro area aren't taking advantage of tax credits being offered for building affordable housing.

Meanwhile a similar program in Seattle is very popular and local developers are suggesting changes to the program.

Read more. 

Wednesday, June 25, 2014

Metro: Portland Metro To Add Up to 750,000 People By 2035

A forecast for the next two decades of growth estimates that the Portland metropolitan area will have between 2.7 million and 3.1 million residents by 2035.

That's a 400,000- to 750,000-person increase from the 2013 population of about 2.3 million.

Monday, June 23, 2014

Increasing apartment property values through NOI

by Lee Fehrenbacher,
HFO Research Analyst

It’s a good time to be a seller in the Portland/Vancouver area.

With vacancy rates as low as 3 percent, and rents pushing $1.16 per square foot, demand for apartments is high – from tenants and investors alike. But with a lack of available product on the market, opportunities to get a financial foot in the door are scarce, and that could spell opportunity for Portland/Vancouver area building owners.

Last week, HFO’s Greg Frick described those market dynamics to a room of private investors at the Heathman Lodge on Northeast Greenwood Drive in Vancouver. A scarcity of available multifamily investment properties, he explained, has helped compress cap rates in Vancouver into the low 6 percent range – which, with interest rates expected to rise in the not-too-distant future, is as low as they’re likely to go.

As such, there probably won’t be a better time for owners to sell in the current real estate cycle. But first, Calton urged landlords to take another look at their properties’ income streams. Consider that in a 6.6 percent cap market, for every additional $50 a unit generates per month, the value of that unit increases by roughly $9,000, he said.

HFO brokers offered a number of strategies for increasing a property’s Net Operating Income:
  • The trap of over occupancy – If a property is consistently 100 percent occupied, there’s a very good chance it’s not charging enough rent. Having a small percentage of vacant units allows landlords to assess the market’s appetite to pay more. Consider placing an advertisement touting higher rents as soon as a tenant gives their notice to vacate. If a unit traditionally garners $1,000 per month, try listing it for $1,050 or $1,100 and see who bites.
  • Add amenities – Amenities are becoming increasingly important for tenants, who are expecting more for their dollar as rents rise. Of all amenities, missing dishwashers are probably the biggest deal killers. Many residents are willing to pay as much as $100 more a month to have one. The same is true for washers and dryers. Some managers are also looking at including WIFI services in base rents.
  • Pet rent – More and more renters in Portland have dogs these days, and as a result many apartments are opening their doors to their tenants’ four-legged friends. But instead of just charging a pet deposit, some owners are charging a monthly pet rent.
  • Appliance rentals – Some apartment managers are beginning to rent out appliances like vacuums and carpet cleaners – things renters need occasionally but not enough to buy themselves. “How great would it be for your residents to pay you to help clean up your property? That one is becoming more and more popular.”
  • Reduce utility expenses – common sense upgrades to low-flow toilets and shower heads, sink aerators, and LED light bulbs are easy changes that can go a long ways toward cutting expenses. Combine that with native landscaping and many owners are able to reduce water usage to as much as half. 
  • Vending machines – all over the country, managers are adding new vending machines that can sell everything from deodorants to cleaning products, from the convenience of the main lobby.  Some machines bring in as much as $2,500 per week.
  • Take nicer pictures – When marketing apartments for rent, it pays to have quality photos. Even though you’re not supposed to judge a book by its cover, residents do.
Other income-producing improvements could include:
  1. Instituting a RUBS program
  2. Leasing rooftop space to cell tower owners
  3. Increasing the cost of a load of laundry.
But before making any of those decisions, investors should really get to know their market. Baby boomers, for instance, searching for luxury apartments won’t be looking for the same things as 20-somethings straight out of college. A successful building will respond to the specific needs of its targeted demographic.

For more ideas on positioning your property for maximum return, contact the HFO team at 503-241-5541.

In Vancouver: Apartment Fires Over The Weekend Result in One Death

The Columbia Tech Center Lofts, planned as a 90-unit complex just south of Mill Plain Boulevard near Southeast 177th Avenue, was about half complete when it burned to the ground on Friday. The estimated financial loss was between $3 million and $3.5 million.  Read More.

Meanwhile in a second Vancouver incident early Sunday morning, a woman was killed when she fell asleep with a lit cigarette and her apartment caught fire.  Read More.

Wednesday, June 11, 2014

Apartment Managers Hoping to Block Exits, Focus on Retention

Renewals were the hot topic in Atlanta earlier this year, with retention of renters the front-burner issue. Axiometrics forecasts that competition for renters will be intense, with more than 240,300 new apartments being delivered in 2014. According to a recent survey by the National Multifaily Housing Council, resident renewal intent has dropped from 65 percent in Q2 2010 to 54.9 percent in Q4 2013.

Click here to read the full article.

Tuesday, June 10, 2014

Portland Rents Forecast to Ascend at Compound Annual Rate of 3% Through 2018

According to Red Capital Group, Portland employers added more than 24,000 jobs last year, a pace of 2.3% with the construction industry expanding at an 8.9% annual rate – the fastest in 10 years. Tech hiring also accelerated as professional services firms and health care slowed. 

Trends in Vacancy Rates
According to REIS, Portland renters absorbed 984 units in 2013, the highest in three years and vacancy was set at 2.9%the lowest in 24 years that RCR has been monitoring.

Axiometrics reported the following Portland metro vacancy rates (Q1 2014):
Class A – 5.0% vacancy
Class B – 3.7% vacancy
Class C – 3.7% vacancy

Red Capital Occupancy Rate Forecasts
Red Capital reported that apartment demand is expected to decelerate through 2015 but predicts vacancy rates will fall to 3% in 2016 and possibly lower in 2017.
2014 – 96.8%
2015 – 96.8%
2016 – 97.4%
2017 – 96.9%

Rent Trends*
REIS reported a 4.0% year over year rent increase 2012-2013 among all properties while Axiometrics’ same-store surveys of stabilized properties indicated a robust 8.1% year-over-year advance. This was the strongest recorded in two years and indicates Portland may be resisting rent slowdowns widely being observed in other U.S. markets. Rents in Q1 2014 rose at an annual rate of 4.3%. Rent increases were sharpest in Beaverton (8.3%) and Tigard (9.4%) with competitive pressure in NW Portland keeping increases somewhat lower (5.7%).

Axiometrics reported that surveys of larger properties found considerably stronger rent growth averaging 7.6--the fourth consecutive annual metric exceeding 6%.

Red Capital reports that "We estimate Portland rents will rise at an above average 3% - 4% rate through Q3 2016 before slowing to the 1.9%-2.3% range.”

Red Capital Effective Rent Forecasts
11th best performing in the U.S. top 50 (2013)

2014 forecast: 3.7%
2015 Forecast: 3.1%
2016 Forecast: 2.5%
2017 Forecast: 1.9%

Property Markets and Total Returns
Red Capital reported that for 2013, trophy property cap rates ranged from 4.5% to 5.2% while standard class-B assets were trading at about 5.5%

Average cap rate was 6.1%
Average price per unit $110,881
Expected total return 7.5%
18 Sales over $5 million

*Numbers in this report were updated in July 2014 with new numbers from RCR. 

Thursday, June 5, 2014

April's Multifamily Permit Numbers Hit Historical Highs

As the number of housing starts surged to 1.07 million units in April, multifamily once again took center stage. Single-family starts increased only 0.3-percent sequentially (to 649,000 units), but a 39.6-percent sequential bump in multifamily starts (to 423,000 units) fueled the 13.2 percent jump in total housing starts.
But the big story was multifamily’s 453,000 permits in Aprilup 21.8 percent from March. The apartment sector has only seen those kinds of initial permit numbers twice in the last 25 years—June 2008 and January 1990, according to a report from Tampa-based Raymond James and Associates. Both of these numbers ended up being outliers. The last time the sector sustained these types of numbers was in the go-go days of 1986 and 1987 (before a crash sunk the commercial sector for years).

Tuesday, June 3, 2014

Portland Employment Growth a Robust 2.8% Last 12 Months

The City of Portland has seen strong population growth in recent years, attracting large numbers of adults under age forty. A total of 35 percent of the total population is between the ages of 20 and 39, noticeably more than most neighboring communities.

Meanwhile, the Portland region saw robust employment growth of 2.8% over the last 12 months. Portland’s growth is noticeably faster than the US rate and ranks among the fastest growing regions in the US.

(Oregon Employment Department)

Monday, June 2, 2014

Sunday, June 1, 2014

Four-Story Apartments to Take Over Hawthorne Food Cart Lot

A popular Southeast Portland food cart pod may be headed for redevelopment as an apartment building.

Plans submitted to city development officials describe a four-story apartment building with ground-floor storefronts on the site.

Read more in The Oregonian.