Portland-Vancouver-Beaverton Vacancy Rates Nation's 8th Lowest

The U.S. Census Bureau reports that the Portland/Vancouver metro area's vacancy rate increased from 2.9 percent in the fourth quarter of 2011 to 4.2% in the first quarter of 2012, tied at the nation's eighth lowest.

Seattle-Tacoma-Bellevue, WA had a Q1 2012 vacancy estimate of 4.6 percent, down from 5.8 percent the prior quarter and tied for the nation's 9th lowest.

National average vacancy rates in the first quarter 2012 were 8.8 percent for rental housing and 2.2 percent for homeowner housing, the Department of Commerce’s Census Bureau announced today.

The nation's 10 lowest vacancy rates were:

• Rochester, NY - 1.3
• Bakersfield, CA - 1.5
• Oxnard-Thousand Oaks-Ventura, CA - 2.0
• Milwaukee-Waukesha-West Allis, WI  - 3.3
• San Jose-Sunnyvale-Santa Clara, CA - 3.5
• San Francisco-Oakland-Fremont, CA 3.6 - (Tie)
• Springfield, MA 3.6 - (Tie)
• Charlotte-Gastonia-Concord, NC-SC 4.0 - (Tie)
• Grand Rapids-Wyoming, MI 4.0 - (Tie)
• Los Angeles-Long Beach-Santa Ana, CA 4.2 - (Tie)
• Portland-Vancouver-Beaverton, OR-WA 4.2 - (Tie)
• Baton Rouge, LA 4.6 - (Tie)
• Seattle-Tacoma-Bellevue, WA 4.6 - (Tie)
• Worcester, MA 4.6 - (Tie)
• Alburquerque, NM 4.9 - (Tie)
• Fresno, CA 4.9 - (Tie)
• Pittsburgh, PA 4.9 - (Tie)

The MSA's with the five highest vacancy rates were as follows:

• Orlando, FL - 22.0
• Detroit-Warren-Livonia, MI - 19.1
• Richmond, VA - 19
• New Orleans-Metairie-Kenner, LA - 15.8
• St Louis, MO-IL - 15.6
• Indianapolis, IN - 14.9

Click here to download the full report

Sold! Sequoia Village $4.8 million; Historic Fairmount $4.2 million

HFO Investment Real Estate is pleased to announce the sale of The Historic Fairmount Inn in Northwest Portland for $4.2 million, the 6th Avenue West Apartments in Beaverton for $1.15 million, 10 Beaverton Townhomes for $1.26 million and Oak Place Apartments in Hillsboro for $1.7 million. In addition, HFO co-brokered with Grubb and Ellis the sale of Sequoia Village in Happy Valley for $4.8 million.

Sequoia Village consists of 58 apartments, including 36 units which are partially completed. The all-cash sale of $4.8 million includes 9.54 acres of land with room for an additional 174 units. Completed units include full size washers/dryers, private decks and patios, cherry/maple wood cabinets, granite and tile counters, and fire suppression sprinklers; some units include attached garages. The seller was IMV 12 CSY Village LLC and the buyer was J&R Causey Village of Portland. HFO Investment Real Estate and David Hill of Grubb & Ellis represented the seller. This sale offered an investor the opportunity to complete a pre-planned project in a tight apartment market.

The Historic Fairmount Inn was built in 1904 and is the last surviving structure originally built for the 1905 Lewis & Clark Centennial Exposition.  The Fairmount was home to wealthy visitors who journeyed to Portland to enjoy the extravaganza.  This landmark property is listed on the National Register of Historic Places and consists of 79 apartment units refurbished with period style doors, light fixtures and ceiling fans. The seller was Historic Fairmount LLC; the property sold for $4.2 million to a local Portland preservationist who plans to keep the property as close to period as possible.

HFO represented parties to the sale of three west side properties: 6th Avenue West, a 16-unit apartment community constructed in 1967 and 10 Beaverton Townhomes, both centrally located in Beaverton.  The Beaverton townhomes sold for $126,000 per unit and feature condo-quality construction and large 1,500 square foot floor plans.  The 33-unit Oak Place in downtown Hillsboro was constructed in 1964 and sold for $1.7 million.

LA Times: Supreme Court Rejects Rent Control Challenge

The LA Times is reporting that the U.S. Supreme Court has rejected a challenge to New York's rent control laws. Read more.

Rehabs that Keep Owners in the Money

This month Multifamily Executive magazine features an article entitled "Out of Rehab" with stunning before and after photos of upgrades to properties that resulted in higher rents. Click to read more.

2012: Déjà vu?

By Greg Frick, HFO Investment Real Estate
Reprinted from the Spring, 2012 Metro Multifamily Housing Association Apartment Report

The Portland area apartment market for 2011 continued along the same two lines as it did in 2010.  There were a small number of institutional sales constituting a large percentage of total dollar volume along with a large number of non-institutional sized transactions capturing a smaller portion of total dollar volume. As occupancy rates remain low, construction of new apartments has begun to pick up. Non-institutional owners are either refinancing at today’s low rates or selling to avoid future increases in capital gains. 

2011 Sales
From 2002-2008 the Portland apartment market averaged 179 sales annually of apartments 10 units and greater. In 2011, CoStar Comps reported 108 sales accounting for just under $1 billion ($960 million) in transaction volume -- the highest in the past decade.*  This was a significant increase in both volume and number of transactions over 2010’s total of 70 transactions and $544 million in dollar volume. Yet even though there was a 50 percent increase in transactions between 2010 and 2011, the market was still significantly below the average 2002-2008 transaction levels. 

This past year was a repeat of 2010 in terms of how transactions could be categorized. In 2011 there were 26 transactions over $10 million.  These 26 transactions accounted for roughly one-fourth of all the transactions and nearly 80 percent of all dollar volume.  In 2010 the number of transactions over $10 million accounted for 19 percent of the total transactions and 80 percent of the total dollar volume.  Historically area transactions over $10 million have accounted for just 10-13 percent of all transactions and 55-65 percent of the dollar volume.

Examples of these major institutional type sales from Q4 2011 include: Reflections at the park: 244 units in Vancouver, $21 million; Westview Heights: 198 units in Portland, $29.5 million; Timber Ridge: 238 units in Portland, $39.5 million; Museum Place: 140 units in Portland, $55.3 million.

2012 Q1 Continuing 2011’s Norm
The first quarter of 2012 saw the following transactions: Center Pointe: 264 units in Beaverton, $34.3 million; LaSalle Apartments: 554 units Beaverton, $77.2 Million; Parkside: 225 units Gresham, $16.45 million.

Occupancy Rates & New Construction
The Portland market is on the map for institutional investors.  As mentioned in this issue of the MMHA Apartment Report, even with a slight uptick in vacancies we are still at historically high occupancy rates and the Portland market continues to be ranked as one of the top U.S. rental markets.  And even though we’ve started to see an uptick in construction of new apartments in the market, especially in the downtown core, we are still vastly undersupplied for multifamily units.  Institutional investors looking to get a foothold in the Pacific Northwest are aggressively pursuing deals fitting their size criteria.

Smaller non-institutional complexes,  80 units and under
The number of transactions in this segment has picked up a bit from 2010 but not enough to see substantial compression in cap rates. There has been a slight value increase compared to 2010 levels.  Yet the values are still below the highs we saw in 2008.

Refinancing Picks Up Steam
There has been a huge pickup in refinancing. Non-institutional owners are taking advantage of the historically low interest rates and placing new debt on the property if their ownership timeline extends past 5 years. 

2012 predictions
There will continue to be a high-level of interest in institutional grade properties. Even with that said the aggressiveness will be tempered a bit. It is our opinion that we have reached the point where cap rates will not go much lower in the institutional transactions. We also expect to see a slowdown in the segment of institutional transactions for two reasons: (1) the high volume of properties which has changed hands in the last 2 years, and (2) the fact that Portland has a relatively small number of these larger properties.

We will also see cap rates compress in the larger B-type properties.  A segment of buyers are now looking for opportunities where they are not competing against the institutional buyers. Properties need to be 80 units and more to attract this capital.  These larger buyers are ideally looking for properties with some sort of distress to allow for greater yields, but this market does not have many properties that fit the bill.

In the non-institutional apartment segment, we anticipate an increased number of transactions as buyers take advantage of low interest rates.  Investors will sell properties as a result of political uncertainty and to take advantage of today’s low capital gains rates before they expire.

With such attractive financing available and cap rates as low as we have seen in years,  apartment sellers feel this is a great time to capitalize on apartments being the “it” investment. 

Feels a lot like 2006 again! Apartments are the hot investments and the DOW Jones Industrial average topped 12,000 for the first time….

Greg Frick is a founding partner at HFO Investment Real Estate, consistently ranked by CoStar as one of the area’s top commercial real estate brokers. This year all four HFO partners were named by CoStar to the list of top 10 sales brokers for 2011. Greg can be reached at 503-241-5541 or via e-mail at greg@hfore.com.

* For the sake of this report, the Portland/Vancouver apartment market includes Multnomah, Washington and Clackamas counties in Oregon and Clark County in Washington State, and includes apartment communities of 10 units or more.   

Three Cities On "Apartment Overdevelopment" Watch

Multifamily Executive announces three cities it's putting on "overdevelopment watch".  They are Washington D.C., Phoenix, and Seattle.  Read more.

 The National Apartment Association reports: "A nationwide survey of more than 500 college students shows that Google scores highest in effectiveness among college students who are looking for an apartment as students continue to turn away from traditional advertising—such as ads in campus newspapers—and instead go online to shop for a new place to live." Read the full story.

Vacancies Tick Up Slightly, Rents Increase

The Oregonian reports today on the Metro  Multifamily Housing Association meeting yesterday, where recent survey data on local apartment rental vacancy rates and rent trends were released. Read the full story.

City Council Approves $20 Million in Outer SE Portland Street Improvements

We were happy to see the Portland City Council has approved $20 million in street improvements east of 82nd Avenue over the next five years.  The projects will be funded by the city, state, and various grants. Read more.

HFO Investment Real Estate Earns Five CoStar Power Broker Awards

HFO Investment Real Estate has been selected by CoStar Group (NASDAQ: CSGP), commercial real estate’s leading independent research firm, to receive a CoStar Power Broker Award. This annual award recognizes the “best of the best” in commercial real estate brokerage by highlighting the U.S. firms who closed the highest transaction volumes in commercial property sales or leases for the entire year of 2011 in their respective markets. 

As the largest professional research organization serving the commercial real estate industry, CoStar is uniquely positioned to identify the top firms and brokers in each market throughout the U.S. All awards are based on transaction data maintained in CoStar's commercial real estate database, which is the largest independently researched database of commercial real estate property information available online.

Cody Hagerman, Greg Frick, Tim O’Brien and Rob Marton also each qualified as four of the top 10 commercial brokers in Portland based on the total sale transactions closed during the year. In order to be selected for this honor, HFO’s partners were evaluated against other commercial real estate brokers active in the region by CoStar Group, and subsequently ranked among the top brokers in the market.

“CoStar Group is very proud to recognize the preeminent brokerage firms and brokers who performed at the industry’s highest level by achieving remarkable sales and leasing success in 2011,” said CoStar Group Founder and CEO Andrew C. Florance. “These top performers truly represent the best of the best in the industry, and they deserve to be recognized for their proven deal-making abilities. We congratulate HFO Investment Real Estate on this impressive professional accomplishment.”

The complete list of 2011 CoStar Power Broker Awards winners can be found at www.CoStarPowerBrokers.com.

Portland Plan Final Public Hearing Weds. April 16th 6pm

The Portland Plan has a final public hearing 6pm Wednesday night April 18th! Click to read more. To download a copy of the final recommended draft Portland Plan, Click Here.

Court Adds New Liabilities for Owners and Members of LLCs

Associated Oregon Industries reports that in the waning days of the hectic February Legislative Session, a little-noticed decision by the Oregon Court of Appeals will have huge liability ramifications for owners and members of limited liability companies (LLC's) in Oregon. Read more.  

It's the Single Ladies...

MPF Research's Property Management Insider blog reports that one discussion at a recent National Multi Housing Council Research Forum focused on recent shifts in the apartment renter base.

"While lots of interesting info was discussed, here’s the big takeaway: if you own or operate apartment product, especially top-tier apartment properties, females play an increasingly important role in your resident mix all the time." Read more at the Property Management Insider.

Josh Lehr to Earn MBA in Barcelona, Spain

The team at HFO Investment Real Estate would like to congratulate R. Josh Lehr on his acceptance into one of the world’s top two-year global MBA program – at the IESE at the University of Navara in Barcelona, Spain!  Josh has left HFO to actively prepare for his move in about three weeks.  No doubt it will be hard work to study the next 2+ years in Europe!  We are excited that Josh was selected for this opportunity to further his career abroad.  He'll be missed around here.

U.S. Apartment Vacancy Rate Reaches Record Low

REIS is reporting that the U.S. Vacancy Rate for apartments has fallen to the lowest level in 10 years, with rents up across the country an average of 0.9% -- the biggest jump in 4 years. Read more at Reuters. 

U.S. Apartment Market Revenue Growth Remains Solid in First Quarter of 2012

U.S. job production came in at levels a little above the expectations of most economists during the first few months of 2012. Did that improving employment picture sustain the nation’s streak of robust revenue growth in the apartment sector, and did the Q1 stats for rental industry fundamentals come in at levels strong enough to raise the bar on the anticipated performance for 2012 as a whole? Watch the MPF Research Video.

27 Newer Units Hawthorne Dist. $5.8M - Call For Offers April 18

Hawthorne 44 is a 27-unit apartment property built in 2009. It is unique for its location, its construction and its unit mix. The unit mix includes both 1-bedroom 1.5-bathroom lofts and 1-bedroom units. These condo quality apartments are spacious with an average size of 993 square feet. Loft units feature direct access to Hawthorne Boulevard.

Hawthorne 44's location in the heart of the desirable Hawthorne district provides residents convenient access to major retail and commercial services. Call our offices at 503-241-5541 for a copy of the Offering Memorandum, or click here to complete the confidentiality agreement and begin a download immediately.