Happy Thanksgiving

At HFO we couldn’t be successful without our valued clients–who trust us to provide advice and services for the properties they invest in. We are thankful for the opportunity to work with each and every one of you.

On behalf of the brokers, I also want to thank our greatest asset–our support team–the best in the industry. Without their hard work, enthusiasm, and commitment we would not be able to perform for the firm's clients at the level we strive for.

I am grateful to be part of an incredible organization who consistently seeks to innovate ways to provide a better client experience. Whether you are spending time with family & friends or enjoying solitude, I hope this day brings peace and gratitude to all.

Happy Thanksgiving,

Spencer Marona

Managing Director

GlobeSt.: Apartment sales could edge past '07 totals

by Spencer Marona, Managing Director

The demand for multifamily has exceeded new supply and the national vacancy rate has decreased to 4.3%. According to Real Capital Analytics data in a recently published GlobeSt. article, "If the current pace is maintained through the end of the year, sales volume could reach $105.2 billion, just nosing past ‘07’s level of $105.1 billion."

With continued employment growth, Millennials entering the workforce and leaving home, and Baby Boomers occupying more apartments as they enter the retirement phase, it appears we are approaching and unprecedented time. Read more about the sales velocity for the multifamily sector across the country in the previously referenced GlobeSt. article.

Post-Crisis Third Quarter Set with US Investments

by Brian J. Rogal, GlobeSt.com

"National commercial investment has moved steadily upward over the past four years, and in the third quarter volumes reached $66 billion, bringing the rolling annual volume to $270 billion, a post-crisis record, according to a new study by DTZ and based on data from Real Capital Analytics. The recent tendency among investors to focus more attention on secondary or tertiary markets also seems to have continued, since growth in eight top metro areas studied by DTZ was somewhat lower. Researchers from the firm expect that demand will remain strong but advise investors to consider moving away from the core areas to get higher returns...."

TED Talks: How to Reinvent the Apartment Building with Moshie Safdie

by Spencer Marona, Managing Director 

Moshe Safdie of Safdie Architects is featured in this +/- five minute short Ted Talk on the importance of reinventing the apartment building. This is a fascinating and informative video for anyone, particularly those concerned with over-development in urban cores.

"In 1967, Moshe Safdie re-imagined the monolithic apartment building, creating "Habitat '67," which gave each unit an unprecedented sense of openness, Nearly 50 years later, he believes the need for this type of building is greater than ever. In this short talk, Safdie surveys a range of projects that do away with the high-rise and let light permeate into densely-packed cities." Ted Talks, March 2014.

Seattle Developer Is Stepping up Pearl Activity

by Spencer Marona, Managing Director

Security Properties broke ground this week on a new mixed-use four building project at North Williams Avenue and North Mason Street.

Security has been active in the Portland market since 2006 with projects in Beaverton and Portland. The past few years have been the most active for Security and you can read more about the details in a recently published article from the Portland Business Journal.

MPF Research: Middle Market Properties Will Be Hot in 2015

Greg Willett, VP of Market Research for Real Page/MPF writing in the November edition of Units Magazine states:

"The best performances should come in the middle-market communities that comprise so much of the total apartment stock and in top-tier developments located in suburban settings.
- See more.

Should You Sell or Refinance Your Apartment?

Sell and exchange? Sell and cash out? Hold and refinance? Hold and improve operations?

It is an advantageous time to own a multifamily property as well as other types of investment properties. Read a recently published article in CoStar found here covering some of these topics and call an HFO broker to discuss your strategy and goals for your asset in 2015 and beyond.

How does the Hot Office and Industrial Sectors Impact Multifamily Properties?

by Spencer Marona, Managing Director

The office and industrial sectors are firing on all cylinders as employers like Nike continue to grow at rapid paces. Manufacturing jobs are on the rise and we all know someone who will utilize e-commerce for their holiday shopping. The tech sector is going gangbusters and in a recent blog post found here, I discussed the positive impact of employment growth for multifamily investors.

Below are links to more recently published articles from the Portland Business Journal demonstrating that it is a good time to be an owner of a multifamily property. However, before clicking on one of the links think about any discussions or conversations you may have during the holidays regarding your multifamily property with family, friends, or business partners. The holidays often set the stage for goals, resolutions, changes, decisions, etc., going into the new year.

Here are some questions to think about as we approach the end of 2014:

• Where would you like to be next year, 5 years, or 10 years with respect to your property or real estate portfolio?
• What are you doing to maximize the value of your property? 
• How do you think your property compares to others in your market?
• What is most important to you about owning that property (cash flow, equity buildup, appreciation)?
• If you chose to sell, what would you do with the proceeds?

We cannot tell you whether it makes sense for you to sell your multifamily property without having a conversation about what you are trying to accomplish, but we can help bring clarity. Sometimes, holding and improving operations makes the most sense for an owner—and our brokers are never shy about telling you just that.

Contact an HFO broker to discuss your investment property goals or how the employment sector will continue to impact the value of your property.

Nike expansion plans grow, construction set to start in 2015
Kish, M., (2014). "Nike expansion plans grow, construction set to start in 2015", Portland Business Journal. November, 19, 2015. Available at: http://www.bizjournals.com/portland/blog/threads_and_laces/2014/11/nike-expansion-plans-grow-construction-2015.html

Portland tech startups get lesson on navigating real estate jungle
Spencer, M., (2014). "Portland tech startups get lesson on navigating real estate jungle", Portland Business Journal. November, 18, 2014. Available at: http://www.bizjournals.com/portland/blog/real-estate-daily/2014/11/portland-tech-startups-get-lessons-on-navigating.html

Nike buys out tenant early, giant expansion project nears
Kish, A. (2014). "Nike buys out tenant early, giant expansion project nears", Portland Business Journal. November 17, 2014.  Available at: http://www.bizjournals.com/portland/blog/real-estate-daily/2014/11/nike-buys-out-tenant-early-expansion-project-nears.html

Hacienda gets $18M to build out in Southeast Portland
Giegerich, A. , (2014). "Hacienda gets $18M to build out in Southeast Portland", Portland Business Journal. November 17, 2014. Available at: http://www.bizjournals.com/portland/blog/2014/11/hacienda-gets-18m-new-reasons-to-build-out-in.html

Lenders Hungry for Commercial Real Estate

By Erika Morphy, GlobeSt.com--

The commercial real estate lender community shows no signs of scaling back its appetite for business, according to the Fall 2014 survey of Commercial Real Estate Lender Sentiment, a report issued by the Real Estate Lenders Association and Chandan Economics. In fact certain providers, such as CMBS lenders and life companies are expected to grow their market share – and that growth will most likely come at the expense of national and foreign banks, as well as relatively slower growth in agency lending. Read more at Globest.com. [Requires free registration]

Northeast Portland's New Mixed-use Grant Park Village Welcomes Residents Above New Seasons Market

Residents and workers in northeast Portland will no longer have to pass a dormant block on Northeast 33rd and Broadway. Instead, they will be passing Grant Park Village, the anticipated $60 million new mixed-use development, which is made up of 211 apartment units on top of approximately 47,500 sf of ground level retail. Capstone Partners, who led the development, hit a home run when they secured the hip and trendy New Seasons Market as the anchor retail tenant. Read more about this in a recent PBJ article here.

$18 Million Boost for Affordable Housing in Portland and Hillsboro

Nonprofit housing provider REACH Community Development received good news and announced they have received approximately $18 million in tax credits and grants to help develop and renovate a combined 108 units of affordable housing. The properties including the Bronaugh Apartments in downtown Portland and the Orchards at Orenco-Phase II in Hillsboro.

The $18 million investment comes through a combination of 9 percent Low Income Housing Tax Credits, Oregon Affordable Housing Tax Credits and grants from Oregon's Housing and Community Services. More can be read in a recently published Portland Business Journal article.

HFO-TV Exclusive Update on Proposed Short-Term Rentals in Portland Apartment Buildings

The City of Portland Office of the Mayor has released its draft recommendations for short-term rentals in multi-dwelling structures. The rules require approval by a landlord or homeowner association. Tenants must submit a notarized signature of the property owner or homeowner association and comply with all the rules.

A public hearing on the draft regulations before the City Council is scheduled for Wednesday, November 19th at 2pm at Portland City Hall.

I held a recent interview with Matt Robinson of the Office of the Mayor on this important issue.

Ready for Takeoff: $43 Million Coming to John's Landing

by Spencer Marona, Managing Director

The history of John's Landing is simple, much like how the neighborhood exists today. Simplicity is the reason why John's Landing is one of my favorite neighborhoods in Portland. It's safe, clean, has most retail necessities and the access to downtown is ideal for those who do not want to live within walking distance to the CBD. I also happen to live in John's Landing during the week, so maybe I'm biased.

When I think of John's Landing, several of Portland's well known eateries and locations come to mind such as: Corbett's Fish House, Buffalo Gap, Macadam's Bar and Grill, Willamette Park, the Water Tower, Stanich's (before the John's Landing location closed) and the former Willamette Athletic Club. The WAC suffered from the impact of the Great Recession and a perception that it was exclusive to the upper-class according to a 2011 post on a neighborhood site on JohnsLanding.org.

Until a few months ago, the last time I lived in the greater Portland area (Lake Oswego), the year was 1998. With some minor changes in the neighborhood, it still looks the same as it did 1998. Not a lot has changed and I wouldn't be in this industry if I didn't appreciate change.

Breaking ground next month a big change is taking off in John's Landing led by Portland's Guardian Real Estate Services. They are investing $43 million in the development of a 166-unit apartment building. Considering there hasn't been any institutional-size development of any property type for approximately 15 years in my new stomping grounds, this is a big change. It is also one that will probably not be repeated for quite some time.

According to Adrian Boly, Guardian's vice president of acquisitions and development in a recently published Portland Business Journal article, most of the parcels are spoken for and if anything new was found, it would be infill. You can read more about this development and view renderings of the project in the PBJ article.

GlobeSt: 2015 Housing Confidence Slowing Down

Imprev, a Bellevue, WA company released their 2015 Imprev Thought Leader Survey and concluded that their is slight decrease in confidence with the housing market compared to the previous to years. Those who were surveyed included included more than 270 broker-owners and executives at top franchises that brokered approximately half of the transactions last year. Read more about the recently published GlobeSt. article here.

This shouldn't come as a surprise for those of us who have weathered a real estate cycle or two. History repeats itself and we unfortunately do not live in a world where everything only goes up. When the market does slow down, hopefully we can all be more prepared. How are you preparing for a change in the market if one were to happen over the next 12 - 24 months? 

Call an HFO broker for more information to learn about what other apartment/investment property owners are doing today so that they are prepared for tomorrow.

GlobeSt.: Job Growth, Rent Growth - A Matched Pair

by Spencer Marona, Managing Director

Similar to my previous post, 'PorTechLandia: Tech Sector is Fueling Portland with Growth', 9 Nov. 2014, GlobeSt. recently published an article on the direct correlation job growth and rent growth. There is a direct correlation between apartment rents increasing with employment growth and this is a good thing. You can read the GlobeSt. article here.

However, the risk each market faces is an oversupply of new multifamily construction. We are in an unprecedented time with the Baby Boomer and Millennial generations leaving and entering the workforce. Some experts are predicting the demand for apartment units to maintain a steady balance throughout the next several years. More information on Baby Boomers and the increase multifamily owners are seeing can be read in another recently published GlobeSt. article found here.

Only time will tell. Either way, contact an HFO team member to see if there have been demographic shifts in the neighborhood of your investment property to make sure you are positioned for maximum returns.

Dodge Data & Analytics: Nationwide Multifamily Construction to Continue Upswing

At the recent 76th annual Outlook Executive Conference in Washington D.C. , Dodge Data & Analytics predicted that 2015 Multifamily housing would increase 9% in dollars and 7% in units to 405,000 (Dodge basis). Occupancies and rent growth continue to be supportive, although the rate of increase for construction is now decelerating as the multifamily market matures. Read more.

PorTechLandia: Tech sector is fueling Portland with growth

by Spencer Marona, Managing Director

The City of Roses, Rose City, Beervana, Bridgetown, P-Town, Rip City, Little Beirut, and Portlandia are known nicknames for the city of Portland, OR. Lately, I have heard and read about Portland becoming the 'New Silicon Valley' of the northwest.

Due to ridiculously high costs of living and expensive office rents in San Francisco, Silicon Valley, and Seattle, many entrepreneurs and reputable tech companies are landing in Portland. As new arrivals and rooted tech firms continue to hire and occupy more space, vacancy rates in office and flex properties decrease. This allows landlords to be bullish in lease negotiations, resulting in an increase in their net operating income or NOI. It is the law of supply and demand. This also impacts the housing market, particularly multifamily properties.

More employees = more renters. More renters = lower vacancies. Less units to rent = increased asking rents. Increased asking rents = higher NOI.

Not all can afford a spike in rents and other costs within a relatively short period of time. Consequently, the market acts like an accordion pushing commercial and multifamily tenants out of the city's core and into the suburbs.

However, real estate is cyclical. When the tides change, layoffs unfold, and companies need less space. Occupancy rates go down and vacancy rates increase. To remain competitive, landlords are forced to lower rents, offer concessions, and this allows tenants to move closer into the core.

Fortunately, we are in a bull market and capital is cheap. Portland is firing on all cylinders. Last month CNN.com named Portland number three as one of the 2014 most innovative cities in America behind New York and Boston.

This week the Portland Business Journal announced that Puppet Labs, a fast-growing tech company of approximately 300 employees, moved into their new headquarters at 308 S.W. Second Ave., PorTechLandia, OR. They are hiring another 43 and the new location can accommodate up to 500 employees.

Call Portland whatever you want. It is a land of many things, but I'm sticking with PorTechLandia.

Contact an HFO broker to see how we can advise you with your multifamily investment property goals. 

Development:Talks of $50 Million and Tallest High-Rise in Spokane

Dr. Phillip Rudy, a Spokane Valley dentist and developer has an ambitious goal to develop a 35 story, mixed use high-rise on the southeast corner of Division Street and Spokane Falls Blvd. This would be 15 stories higher than the current tallest building in Spokane. According to Rudy, a mixed use combination of retail and housing, possibly for students at nearby Gonzaga and Washington State.

Irony: Trends in Designing for Millennials

by Spencer Marona, Managing Director

1) "Millennials seem to have this desire for authenticity...for everything to be sort of real..."

2) "The most important common space for them is really the 'social activity space'..."

3) "...I have three Millennials on staff that are advisors and they all live in apartments...I survey them on what they want, and the survey is be text."

Question for the three architects that were interviewed in a recent MFE Multifamily Executive Magazine webcast: how many extra electrical outlets do you factor in for their smart phones and other mobile devices in these 'social spaces' while they are living authentically and not digitally?  Click here to see the webcast on MFE.

Hanley Wood Media, Inc. "Trends in Designing for Millennials." 07 October 2014. Online video clip. Trends in Designing for Millennials. Accessed on 05 November 2014. <http://www.multifamilyexecutive.com/videos/trends-in-designing-for-millennials>

Portland Employment Growth 2.6% With Professional Services & Healthcare Leading Job Growth Since 2004

by Christian Kaylor
State of Oregon Economist

The Portland region continues to grow jobs at a solid annual pace of 2.6%. Compared to the 50 largest Metro regions in the US that ties us for 16th with Charlotte, North Carolina. Our growth rate is mostly in line with other major West Coast Metros.

Two major industries stand out for job growth over the last 12 months : Construction, and Professional and Business Services. Almost all major industries are growing, with the notable exception of High Tech Manufacturing.

Occasionally, it's good to step back from the current economic data to see the longer term trend. Over the last ten years we've experienced an economic recovery, a major recession and now another few years of sustained economic growth. Just two major industries make up more than half of all the net job creation in the region since the Fall of 2004 : Professional and Business Services, and Health Care and Social Assistance.

 

Another thing has changed over the last ten years. Multnomah County job growth was often 2nd to Washington County in the last economic recovery. 2014 marks the 4th year in a row that Multnomah County created more jobs than any other county in Oregon, with Washington and Clackamas Counties now growing noticeably slower than they did in the last economic recovery ten years ago.

Two interesting things stand out since July. First, the historic surge the region saw in residential building permits during the Summer has mostly faded, with 3rd quarter permit numbers almost exactly where they were for the 3rd quarter of 2013. That seems to project 2014 looking like 2013. Still strong, but without  noticeable momentum toward future growth or decline.



Second, in 2013, condo and apartment building activity in the region was almost entirely exclusive to the City of Portland, with little to no activity in the surrounding communities. This year, Vancouver and Hillsboro are also now planning on developing multi family housing in volume.

Portland's Dilapidated Centennial Mills: 120,000 SF Of New Residential In Draft Development Agreement Next Month?

Last week the Portland Development Commission (PDC) held an informational meeting with Harsch Investment Properties on the potential development of Centennial Mills in a $115 million project that would keep two of its 12 structures while turning the eyesore into a mixed-use development of residential, office and retail space. Harsch Investment has spent $1.4 million exploring development options and is requesting a $38.5 million investment of public funds.

The PDC is likely to schedule public meetings in the coming weeks and may even have a development agreement drafted with Harsch by next month.

Centennial Mills Images: Future Iconic Gateway to the Pearl?

NY Times: Younger Adults Opting to Rent. Multifamily Shortage Ahead?

A recent NY Times article reports that millions of 20- and 30-somethings who previously doubled up with friends or lived with parents during the Great Recession have started moving to apartments.

“They’re not going to go from living with their parents to buying a home,” said Mark Zandi, chief economist at Moody’s Analytics, speaking at a housing conference in Washington. “They’re going to rent an apartment.”

Mr. Zandi said the nation needed even more new rental units, especially affordable ones. Vacancy rates for rentals are as low as they have been in more than two decades, and the price of renting, in turn, is climbing.

“Our problem in the next three to five years isn’t a surfeit of multifamily housing but a shortage,” Mr. Zandi said. Read the full article. 

Crowdfunding: Wave of the Future is now, Part 1 of 3

by Matt Reynolds & Spencer Marona

Crowdfunding, Part 1
In this three part series, we will be covering crowdfunding in the investment real estate sector: (a) what is crowdfunding and the impact we are beginning to see; (b) the process involved for accredited investors; (c) the current debate and potential implications looking forward.

What is crowdfunding?

In an industry that has produced and taken away millions for private investors during CRE cycles, a new wave of investing is gaining momentum. According to Wikipedia, 'Crowdfunding is the practice of funding a project or venture by raising monetary contributions from a large number of people, typically via the internet.'

Crowdfunding has been around since the late 90's, being used to raise money for everything from non-profits, startups and small businesses. Kickstarter, one of the more popular crowdfunding platforms, was launched in 2009 and purchased this year by Facebook for $2 billion. Since its inception, Kickstarter reports 7.3 million people have 'pledged' or invested $1 billion in approximately 72,000 creative projects on their platform.

Technically, “equity crowdfunding” — the sale of corporate equity stakes through online platforms — wasn’t legal until Congress passed the JOBS Act in 2012. This made equity crowdfunding legal, but only for accredited investors. The U.S. Securities and Exchange Commission defines an accredited investor as one who has a net worth of $1 million, excluding their primary residence, or an annual income of at least $200,000.

Is crowdfunding impacting investment real estate? 
This year, investment real estate is the hot topic with crowdfunding. Some experts expect crowdfunding to be a game changer for commercial real estate primarily due to online social media. In addition, a number of developers and landlords have turned to crowdfunding because banks or other conventional resources have turned them away.

Nav Athwal, co-founder and CEO of RealtyShares, stated in a 2013 Forbes article that $5 billion in capital was invested in 2013 via crowdfunding, including donations, debt, rewards, and equity. In addition, $100 million was invested in real estate with hundreds of properties.

We may be at the tip of the iceberg with this investment strategy and it is catching on across the world. With the passage of the JOBS Act, entrepreneurs and small business have been given the opportunity to grow with capital that they would not have had access to otherwise.

This activity is taking shape right now with a CrowdStreet, a Portland based crowdfunding platform connecting accredited investors with investment grade real estate. You can read more about Crowd Street in a recently published Portland Tribune article. 

In the next series we will cover some examples of how crowdfunding works.  

Crowdfunding is Attracting Institutions

by Spencer Marona, Managing Director.

Chief Production Officer, Elizabeth Braman, CCIM, of Realty Mogul, discusses the  interest and capital she is beginning to see from institutions getting involved in crowdfunding, what investors Realty Mogul targets, and the debate over non-accredited investors entering this space. You can view the recent interview from CCIM Thrive in Los Angeles here.