Saturday, January 31, 2015

Portland's Developer Capstone Partners Is Working on Bringing Energy-Smart Apartments

Local real estate developer, Capstone Partners, is working with Internet of things startup IOTAS to implment its smart technology  as a test site in the Grant Park Village complex.

The project is targetted to provide a digital profile for users similar to what some of the major players like Facebook and Google have done with their profiles. A number of items such as lights, doors, and water will be able to be monitored through sensors. More on this can be found in a recently published Portland Business Journal article.

Wednesday, January 28, 2015

Portland Metro on Track For Nearly 7,000 Apartment Unit Permits Granted in 2014

An analysis of statistics provided by the U.S. Census bureau by HFO shows that multifamily construction permits for the Portland metro area are on track to reach their second highest level in 17 years.

A total of 6,484 units of multifamily permits are reported as having been granted through November 30, 2014, setting up the potential for over 7,000 permits to be issued this year.

Tuesday, January 27, 2015

Results of National Survey of More Than 27,000 Renters: What They Want

Multifamily Executive has released the results of their national survey of renters, more than half of which were Millennials, and 25% of whom are renters by choice.

So what are they looking for?

  • 51% want to buy a home in the next 5 years
  • Younger age groups are most interested in buying
  • People are embracing green living
  • 17% of renters would like to buy an electric car in the next five years
  • They want ways to stay fit
  • 85% of renters spend weekday evenings at home, and go out on the weekends
  • 42% of renters cook daily
  • Quietness emerged as a highly preferred aspect of apartment living
  • The older renters are, the more they want storage available

More survey results will be revealed at this year's Multifamily Executive Conference, October 5-7 in Las Vegas.

Stay tuned!

Techtown Portland: People on the Move

Learn about six people who relocated to Portland to join the booming tech industry. Supported by the Portland Development Commission, Techtown Portland is a collaborative group of 20 organizations and companies aligned with the passion to promote Portland as an emerging destination for tech companies and employees. 

Monday, January 26, 2015

7 Reasons You'll Be Thinking About Solar Power Soon

by Trevor T. Calton, MBA

In case you didn’t already know, solar power is here to stay, and it’s coming your way. In the next two years, solar power will reach “price parity” with the market in over two-thirds of the country. Even more exciting, by 2050, solar is projected to be the #1 source of power worldwide.

Here are a few more reasons you’ll likely be thinking about solar power sooner than later…

Costs continue to drop – Solar technology has been around for decades, but until recently, the overall costs of the systems have been prohibitively expensive. But in the past five years, panel and system costs have dropped over 75%, and they continue to fall. The payback period is now so short that many suppliers are offering “$0 Down” incentives just to get started.

Battery technology continues to improve – Solar has not been reliable on a large scale because weather patterns are inconsistent. A key element in the widespread adoption of solar power is battery storage. Thanks to innovators like Elon Musk, we are entering the age of being able to truly harness the sun’s power.

Tax credits are still in place – Assuming Congress extends the 30% investment tax credit on system costs, solar electricity is on track to be cheaper than average electricity-bill prices in 47 states in 2016. Even if the US does not extend the 30% credit, solar will still reach price parity in 36 states, over 2/3 of the nation.

Financing is still attractive – It’s a ‘borrower’s market’ out there for investments of all types, at least for now. Banks understand the value solar systems add to a property, and they continue to lend money. With low interest rates and abundant available capital, leveraging to upgrade systems makes more financial sense than ever before.

Solar makes your property more valuable – Whether it’s residential or commercial, solar power just makes sense. Properties with solar systems have lower operating costs, and tenants will pay more for space with lower utility costs, increasing both net operating income and property value.

Thursday, January 22, 2015

HFO-TV: Will Metro's Proposed Density Plan Degrade Area Livability? Interview with Gerard Mildner [video]

In an interview with Gerard Mildner of the PSU Center for Real Estate, interviewer Greg Frick discusses Dr. Mildner's recent critique of Metro's 20-year growth plans. The latest Metro models project substantial rent and housing price increases as a result of the limitation of the Urban Growth Boundary (UGB) expansion.

Businesses, homebuilders, the commercial real estate industry and suburban mayors have voiced concerns that the emphasis on high density could push Portland housing expenses to the same levels as San Diego, San Francisco and Los Angeles.

In our interview, Dr. Mildner argues that if Metro's projections hold true, fewer companies will want to locate here and recent college graduates will flee to other cities with lower housing costs.

In addition, Mildner argues, the recent influx of California residents from cities with rent control could result in calls for similar laws here.

Mildner: "To me, Metro needs to change the way that they look at land and have housing pricing and housing rents factored in as a variable and recognize that they have some control over."

A recent article in The Southeast Examiner reflected on the possibility of Portland losing its creative class as a result of surge in housing expenses. Read more.

Wednesday, January 21, 2015

GlobeSt: Where Are We in This Cycle?

According to a recently published article on, we are in the 7th or 8th inning of the current commercial real estate cycle. This analogy makes sense considering this cycle started in 2009. However, with the amount of investment activity we are seeing and advising our clients on, I argue that no one took a break for a 7th inning stretch.  

Don't let what what occurred to many investors and owners in late 2008 and 2009 happen to you. No one I know was prepared for the economic crash. Learn from history and prepare for the future. We can help whether you are considering: a disposition, acquisition, consolidation of assets, diversifying to spread risk, holding and refinancing, or holding and improving operations. Call an HFO broker with questions on the current state of the market, implications for your property, and advice for your investment strategy.

Monday, January 19, 2015

Tiny Apartments in the U.S. -- Can You Guess Which Cities Rank Among the Top?

The first city that I thought of was New York. I wasn't even on the right side of the country with my guess. Seattle ranks number one (90 square feet) with Portland in second (150 square feet) for cities allowing the development of micro-housing--apartments and other dwellings smaller than 300 square feet.

You can read more about these developments and other cities on the list in an article published by Gizmodo last quarter.

The Oregonian: Tech Scene Is Going Gangbusters

According to a recent article in The Oregonian, "Oregon tech companies are flying off the shelf." The tech sector has hit its highest point in the past 10 years and industry experts are forecasting more job growth in 2015.

In addition to the greater Portland area, cities like Bend are positively being affected by the tech industry and some are calling Portland: "The New Silicon Valley of the Northwest." One goofy individual is calling Portland: PortTechLandia.

Read more about the local tech scene in and why entrepreneurs are choosing Oregon over other destinations in the recently published article.

Thursday, January 15, 2015

HFO-TV [Video] Portland Central City 2035 Update

City of Portland planner Troy Doss discusses the Central City 2035 plan update. The Central City plan has not been updated since 1988 and is part of the City's comprehensive plan. Click here to learn more.

Tuesday, January 13, 2015

Crowdfunding: The Wave of the Future Is Now, Part 2 of 3

Illustration by Alis Atwell for Bloomberg Businessweek, Source: Getty Images (9)
by Matt Reynolds and Spencer Marona

In part 1 of this 3 part series we covered: what is crowdfunding and the impact we are beginning to see on investment real estate. Part two discusses the process involved for accredited investors.

Crowdfunding, Part 2

If KickStarter and traditional brokerage for investment real estate had a baby, the child would be crowdfunding. The name of this child would also be the industry leader for  US real estate crowdfunding:  Fundrise, based in Washington D.C.

In attempting to push the possibilities of real estate capital raising they have brought into the limelight many key issues surrounding real estate investment. Prior to the passing of the JOBS Act in 2012 investing in real estate required investors to be officially accredited. To become an accredited investor required that you be an extremely wealthy individual; earning more than $200K per year or having a net worth of more than $1million. Fundrise Co-founder Ben Miller, points out that this makes it nearly impossible for anybody but institutional investors to invest in Real Estate. Miller claims this has caused a divide between investors and locals. Fundrise’s marketing campaigns aim to put the power on investing in property back into the hands of the people that the property will impact.

For many crowdfunding sites, minimum required investment amounts are still relatively large for people of average income. CrowdStreet, the most prominent Portland based company, requires a minimum investment of $10,000. By comparison Fundrise has offered deals that allow for investors in specific states to invest as little as $100 dollars, an exciting glimpse at what the future might hold. Crowdfunding sites find and investigate potential deals and then market deals that meet their standards to investors, usefully through their website. This places responsibility for finding good investments almost entirely on the shoulders on the crowdfunding company. Crowdfunding is new so naturally many investors are nervous, and traditional financial advisors—potentially worried about future threats to their own positions—are skeptical. For the moment crowdfunding companies appear to be choosing the investments they offer with great care.

Many real estate crowdfunding companies essentially act as a marketplace connecting investors to developers or other real estate companies. If you think about each real estate deal then this process is not incredibly dissimilar from the way stock markets operate. Individuals invest money into the real estate deal. When the deal becoming profitable they receive a proportionate amount of return. Finally, when the property is sold they receive their share of the sale revenue. Each investor also jointly assumes the traditional risks associated with real estate investments. For example if the building fails to sell, loses value, or become unprofitable then it is possible that individuals will see their investments evaporate.

Crowdfunding can also be used to supplement capital for institutional investors. For example, CrowdStreet recently raised $2.7 million to help Portland based Windmill investments purchase an $18.4 million apartment complex in Dallas. Windmill helped sponsor the deal by putting $300,000 of its own money on the line. Collectively, CrowdStreet and Windmill were then able to take out loans to cover the additional cost of the property.

The advantage to this type of investing is that it opens up new sources of capital previously unavailable to real estate investments. The biggest hurdle to overcome will be for crowdfunding companies to manage the risk of handling money from thousands of investors and limiting their liability to developers and investors if a deal goes south.

Part three of this series will cover the current debate and potential implications for crowdfunding and investment real estate in the future.

Cathedral Park and St. John's Welcomes the Opening of Marvel 29

Marvel 29, a pet-friendly, apartment and condo building in the heart of St. John's neighborhood is scheduled to have their grand opening on January 15, 2015. The new building consists of studios, one bedrooms, two bedrooms, and a variety of amenities. These include a roof top terrace, conference room, courtyard with BBQ grills fitness room and a coffee bar with Wifi. Whether one wants to stroll through Cathedral Park, admire the view from the balcony of their unit, or master a craft in their live-works space, they can also save a trip to the dog groomer by utilizing the building's dog wash. Read more at the Marvel 29 website and in this article by the Portland Business Journal.

Wednesday, January 7, 2015

Puget Sound and Portland/Vancouver: 2014-15 Top Economic Market Drivers, Part 2 - Portland/Vancouver


In Part 1 of this two part series on the 2014-15 top economic market drivers in the northwest, I covered the Puget Sound market; primarily these three forces: Amazon's growth, Chinese investors, and Boeing's 777X contract. Part 2, (written and researched by the HFO team) covers the top economic market drivers in 2014-15 in the Portland/Vancouver market. 

Part 2. Portland/Vancouver - firing on all cylinders. 

By Lee Fehrenbacher, with research by Tyson Cross, Cody Vaz, Matt Reynolds and Chris Wang.

With more breweries, handlebar mustaches and abnormally tall bicycles per capita than most cities in the nation, Portland is no stranger to colorful stereotypes. Infamously, it’s the place where young people go to retire.

But increasingly, Portland is becoming a popular destination for investors as well. In 2014, buyers pumped some $1.3 billion into the local multifamily real estate market. Stereotypes aside, there are very tangible reasons why – population, employment and economic growth being chief among them. And while it’s true that Portland has become something of a mecca for the young, they’re hardly moving here to retire.

The demographic shift:

In a 2012 study, researchers at Portland State’s Population Research Center found that Portland (along with Seattle) was one of only two of the 50 largest U.S. metros that had consistently been a top destination for young college-educated migrants over the past 30 years. That’s important because young, highly educated citizens bring new ideas and resiliency to an economy.

In Portland, millennials make up roughly 32 percent of the population – a proportion similar to populations in major metros like Seattle, San Francisco, Los Angeles and Phoenix, according to the U.S. Census Bureau. Additionally, nearly 44 percent of Portland’s population over the age of 25 has a bachelor’s degree or better – 15 percent higher than the national average.

Far from retiring, Portland’s young college-educated population not only participates in the workforce at a rate comparable to the national average, but a large number of these Portlanders are entrepreneurs – approximately 9 percent reported being self-employed between 2008 and 2010, as compared to an average of 6 percent among the nation’s 50 largest metros, according to PSU’s 2012 study.

PSU’s researchers attributed Portland’s young “brain gain,” in part, to the region’s efforts over the past three decades to, “manage its growth in a more sustainable way, and promote a vibrant ‘urban fabric.’” United Van Lines made a similar assessment this month when it identified Oregon as the nation’s top moving destination for the second year in a row.

“Unique amenities such as outdoor recreation, arts and entertainment activities, and green space protection likely continue to propel Oregon to the top of the list for the second straight year,” the company reported.

The same could be said for Portland specifically. With city plans dedicated to mass transportation, bicycle traffic and green space, Portland’s amenity rich urban neighborhoods have become a major draw for people around the nation. In fact, Portland has almost become attractive to a fault.

Employment gains vs. population growth:

Between January 2011 and August 2014, the Portland metro added 84,875 jobs – outpacing the 64,500 jobs lost during the recession by 20,375, according to a recent report, by the Portland Business Alliance.

Most of those jobs have come from local service sectors (education, health care, professional and business services, and leisure and hospitality) in lieu of traded sectors (manufacturing, construction, and trade and transportation), which tend to bring in more outside dollars. Nevertheless, the trend is undoubtedly positive and it’s hard to miss the prominent names of Intel, Nike, Boeing, and Oregon Health Sciences University, among others, next to the word “expansion” in business headlines. Portland’s tech start-up scene is also providing a healthy boost to the local economy, as evidenced here, here, and here.

Additionally, the Portland Business Alliance reports that the Portland metro – largely thanks to Intel and the electronics/semiconductor industry – ranked third in the nation last year for gross metropolitan product (GMP). But here’s the caveat – job growth is not keeping up with the population.

The Portland Business Alliance also reports that Portland’s employment per capita has been declining for more than a decade. In 2000, there were approximately 0.53 jobs for every person living in the metro area; by 2013, that number had dropped to 0.47. It’s not that the number of jobs is declining; it’s that the population is growing faster.

“One of the issues that we fight with is because we are attractive to the young creative class – the millennials – is people come here without the jobs and then they find the jobs,” Jerry Johnson, a principal at Johnson Economics, told me recently. “So we always have a lot of labor force available. It’s hard to get the price pressure.”

With more people competing for a limited number of jobs, wages in the Portland metro have had a hard time recovering from the recession. The Portland Business Alliance reports the median household income is still $4,408 below pre-recession levels. Eventually, that will put downward pressure on rising apartment rents but for now the population boom – coupled with the recessionary slow-down in construction and subsequent pent-up demand for housing – has made Portland’s rainy climate appear a lot brighter to multifamily investors.

Apartment sales:

Through fall 2014, vacancy throughout the Portland metro area continued to hit record lows with an average of 3.6 percent – 0.21 points higher than vacancy in the spring, but still well below standard industry performance expectations of 5 percent, according to Multifamily NW. As such, rents increased 11 percent over the previous year to an average rate of $1.22 per square foot. Pierce-Eislen expects the trend to continue.

In its 2015 forecast, the apartment analytics provider predicts Portland rents will grow by another 8.5 percent this year – the fourth largest increase in the nation behind Denver, San Francisco and the east end of the Bay Area, and a full percent higher than projected rent increases in Seattle. With a comparatively lower cost of entry, Portland’s strong fundamentals are providing investors from larger markets and enticing reason to chase yield locally.

Last year, investors spent approximately $1.3 billion on multifamily properties in the Portland metro area – outpacing the previous peak of roughly $1.2 billion in 2007. Of that activity, just 28 institutional deals valued at $10 million or more accounted for the overwhelming brunt of sales volume – approximately $1.02 billion. The majority of sales, 141, were valued below $10 million and accounted for just $226 million.

That doesn’t mean that smaller properties aren’t fetching large offers – HFO is aware of at least two vintage properties in the core under 20 units that are garnering more than $140,000 a door. By contrast, the median sales price per unit in 2014 was $96,645 – a 24 percent increase over 2013.

The development question:

Given the hot conditions of the Portland apartment market, it’s not surprising that development activity has erupted.

In addition to the mid-rise apartment buildings being built in nearly every nook and cranny of the city, at least five 15-story-plus high rise buildings are now currently under construction. Others are in the works. According to a recent report from the Oregon Employment Department, permits for more than 7,000 apartment units were issued to developers in the Portland metro last year – more than double the level of activity seen in 2009, 2010 and 2011.

Johnson Economics predicts the Portland market will see another 7,000 units in each of 2015 and 2016, and that’s generally expected to put upward pressure on vacancies and downward pressure on rising rents. That pressure likely won’t begin to be felt, however, until the end of this year, and with interest rates at historical lows – at least for the time being – Portland’s strong fundamentals will continue to make the market a favorite for apartment investors in 2015.

Tuesday, January 6, 2015

How Did the US Apartment Market Perform in the 4th Quarter? Average Rents Up 3.6%

Did the U.S. apartment market outperformed expectations through the first three quarters of 2014. But with a huge supply volume scheduled to deliver in Q4, a period of historical softness in demand, could the industry sustain that momentum?

MPF Research reports.

Meanwhile the Wall Street Journal reported that smaller cities led the way in 2014 rent increases, with Portland in 12th place overall with rent increases of 4.6%.

United Van Lines: Oregon Remains #1 for In-bound Migration

The migration report of United Van Lines has been released, indicating Oregon remains the nation's #1 top in-migration state.

“Unique amenities such as outdoor recreation, arts and entertainment activities, and green space protection likely continue to propel Oregon to the top of the list for the second straight year,” said Michael Stoll, economist, professor and chair of the Department of Public Policy at the University of California, Los Angeles.

The United Van Lines' 38th annual study found that Oregon was the #1 destination for movers - with 66% of moves to and from the state being inbound - 5% above 2013 levels.

The Northeast region leads the United States in outbound migration. 

The top-five inbound states of 2014 were:
  • Oregon
  • South Carolina
  • North Carolina
  • Washington DC
  • Vermont
The top-five outbound states for 2014 were:
  • New Jersey
  • New York
  • Illinois
  • North Dakota
  • West Virginia

Monday, January 5, 2015

CoStar's Role in Multifamily Real Estate

Greg Frick spent a few minutes talking with CoStar professional Jordan Marona about services that CoStar provides multifamily real estate investors directly and through the brokers at HFO Investment Real Estate. These services include rent surveys and sales data.

Saturday, January 3, 2015

Businesses Old & New Have Plenty to Say About Portland's Central Eastside's Growing Pains

Portland's Central Eastside is a tapestry of old and new. What had been strictly industrial has morphed into a patchwork of office, industrial and retail. Soon, 250 new multifamily units will enter the mix.

The Central Eastside provides about 10% of the city's coveted manufacturing and wholesale trade jobs, but a tight downtown office and housing market is pushing development to the eastside. Any regular commuter or visitor to the area can't escape its wacky roadways with obstacles ranging from sideways trucks to bicycles, construction activity to rumbling trains, and tent cities built by the city's homeless.

Even now City planners are shaping the next 20 years of growth for the Central Eastside, and considering loosening zoning restrictions across much of the district. 

Hear what Central Eastside insiders have to say in this excellent series of video clips, photos, and interviews by Elliot Njus of The Oregonian by clicking here.

The question remains: Growth is certain -- but will there be more parking? 

Friday, January 2, 2015

The Oregonian: The Central Question - Can Portland Build a Different Type of Neighborhood?

Andrew Theen, staff writer for The Oregonian, will be publishing a series of installments on the changes Portland's Central Eastside neighborhood has started to go through and what is ahead. Included will be: videos, stories, photos, and decisions explaining and analyzing the decisions Portland's elected officials, planners, business owners and residents will face

HFO has been a long-term business operator and investor in Portland's Central Eastside Industrial District. We care deeply about this neighborhood and hope to positively contribute to revitalization. Read more about Theen's overview in his recently published article in Oregonlive

Portland's Downtown Plan: 30K new jobs, 20K Additional Housing Units and Goose Hollow

According to a recently published article by Andy Giegerich, Digital Marketing Editor-Portland Business Journal, the latest Portland quadrant plan (West Quadrant Plan) will go in front of Portland's City Council on February 4th for a public hearing. 

The Portland quadrant plans are design ideas that primarily shape the economic and housing development within Portland's five geographical areas. The plans take a look at how downtown Portland will look 20 years from now. Read more about the West Quadrant Pland in Giegerich's published PBJ article

For a specific look into the Goose Hollow neighborhood and significant changes it may see over the next 20 years, read another one of Giegerich's recently published article's in the PBJ. 

Thursday, January 1, 2015

Happy New Year Portlanders - Did Your Rent Increase in 2014?

Chances are they did. According to a report, rents increased by about $200 million in 2014. Portland renters collectively paid $4.1 billion in rent in 2014, up from $3.9 billion in 2013. 

Indicators point towards this continuing in 2015, which is not what renters want to read, but good news for multifamily property owners. Read more about this in a recently published Portland Business Journal article