Anyone who reads my blog assumes that I have a bias for multifamily investments.  I just think they’re the safest niche of commercial real estate…so to assume that would be correct.  But my greatest bias is toward taking considered ACTION.  So many investors miss the best part of the market by aiming, aiming and aiming some more before pulling the trigger.

My Dad taught me a valuable lesson when I was a youngster.  He asked me if I had mowed the lawn as asked.  I replied: “No…but I’m thinking about it.”  He said:  “Well now…thinking about something is a step, but not a very big one.  And now we’re talking about it…an even further step, but still not very big.  To sink a long putt you have to take your time, read the green and envision your success.  But at some point you have to actually strike the ball.  Planning improves success, but without action planning is useless.”  I went out and mowed the lawn right away.   I’d like to tell you that I learned the lesson my father offered me immediately, but like many 14 year old kids it took the message a few weeks to sink in.  Of course, now the message is clear: ” Words and thoughts take a back seat to action.”

“The best time to make an offer on a building is while the firemen are  still moping up.  After its rebuilt the price will go way up.  The multifamily market has taken some hits over the past few years…but I feel now is a good to start a portfiolio…or to expand one. Take action now…call Rick Bean at 503.577.1034 or email me at rick@rosecitycre.com.

Years ago a bright and energetic fellow as running around Eugene with a waffle iron in his trunk trying to get folks interested in a new type of shoe that was designed for running.  The waffle pattern was purported to offer superior traction and performance.  Someone I love and admire was made the same offer given to so many around town:  “Give me $20,000 and I’ll sell you 10% of my new shoe company.”  Today that slice of Nike is worth considerably more than the original offering price.  Many thought about it, few acted.

My question to those that are thinking, talking, and considering investing in apartments is this:  “Will your story 10 years from now be that you thought about investing in multifamily?”  To paraphrase my father’s wisdom: “You are in no danger of making a profit on the good investments you don’t make.”

Take action! Contact Rick M. Bean at Rose City Commercial Real Estate today: 503.577.1034 or rick@rosecitycre.com.

 

Investors continue to prefer U.S. apartment buildings over most commercial properties, even commercial office space, as total multifamily sales volume jumped nearly 80% in the second quarter over the same perioud last year.

Although still just a fraction of its mid-2007 peak, the nearly $15 billion in sales in the quarter brought total investment for the first half of 2011 to $24.5 billion, according to CoStar Group data.

The average per-unit price of apartment properties reached $88,500 in the quarter — the highest since the third quarter of 2008, said CoStar Global Strategist Michael Cohen during CoStar’s Mid-Year 2011 Multifamily Review & Forecast.

FREE:  Rose City Commercial Real Estate will give you a no cost opportunity to develop a long term investment plan customized to your goals.  Portland multi-family investments are poised for solid gains.  Contact Rick Bean now at: 503.577.1034 or rick@rosecitycre.com

Meanwhile, strong renter demand continues to push down apartment vacancy rates and nudge up rents. With capitalization rates for existing properties seeing strong compression in some high-flying markets, larger multifamily developers have responded by starting to ramp up their development pipelines with new projects.

Top coastal markets continued to dominate sales volume in the first half of 2011, including Washington, D.C with $2.6 billion; Los Angeles, $2.3 billion and the San Francisco Bay Area, $2.1 billion. In Atlanta, where investors have sought a large number of distressed properties, sales totaled $1.3 billion in the first six months. In Phoenix, a housing bust market where fundamentals have picked up markedly, also logged $1.3 billion in sales.

For the second quarter, the top five transaction markets were New York City, with $1.35 billion; D.C., $1.3 billion, Los Angeles, $1.21 billion; Atlanta, $764 million and San Francisco, $689 million. Those markets accounted for about 36% of all sales volume nationwide during the quarter, with CBDs and well-located submarkets seeing the lion’s share of deals.

Institutional investors were by far the most active net apartment buyers, with net purchases of $1.6 billion on total acquisitions of $3.9 billion. REITs, private equity and owner/users were also net buyers, while REITs were also net sellers in a few markets such as Portland, Phoenix, the San Francisco Bay Area and Atlanta.

Average apartment capitalization rates continued to fall in the second quarter to slightly below 7%, while weighed average cap rates, driven by the large high-priced transactions in prime markets, declined to 5.7%. However, cap rates for mid-size value-add and opportunity deals are also declining. Cap rates on smaller transactions remain in a holding pattern.

Top deals in the second quarter included the acquisition of a 25% interest in a 20-property foreclosed portfolio by The Related Cos. from Fannie Mae for about $300 million; TIAA-CREF’s acquisition of The Corner at 200 West 72nd St. in New York from Gotham Organization and Phillip International for $209 million, or 1.07 million per unit; and Canada Pension Plan Investment Board’s $84 million acquisition of a 44% interest in a 654-unit property in Seattle from New Tower Trust Co.

Supply Tight Now, But Construction Starts Are Rising

Job growth has been the traditional source of apartment demand in the past. But in this cycle much of the demand is coming from many former homeowners who have become renters since the beginning of the housing crisis. That trend, combined with a growing number of young people forming households, is driving competition for a diminishing supply of apartments, powering the improvement in apartment fundamental since 2009.

CoStar forecasts total supply additions of just 30,000 units in the 54 largest markets in 2011, just one-third of the pre-recession average of apartment delivered between 2003 and 2008. However, multifamily construction starts are starting to tick up, with more than 70,000 starts in the first two quarters of 2011, suggesting a rise in completions in coming years, particularly in the 2013-2015 time period, Cohen said.

“It’s worth paying attention to the supply front,” Cohen said. “This is where I think the apartment market could be a victim of its own success. While we are forecasting below-average annual supply growth, we need to monitor the permitting data and the starts data.”

Vacancies, Rent Concessions Continue to Decline

Renter demand, while not at the outsized levels of 2010, remains very strong across the board, led by the fast-growing southern metros and the rebound in Detroit. Demand growth equaled about 66,000 units in the first half compared to the extraordinary increase of 105,000 units in the first six months of 2010, which was the strongest since 2005. However, the 45,000 units absorbed in the most recent quarter was more than the absorption of the two previous quarters combined, Cohen noted.

By Erika Schnitzer, Managing Editor

Portland, Ore.—Portland-Vancouver-Beaverton has the lowest apartment vacancy rate, 4 percent, among the top 75 U.S. MSAs, according to the U.S. Census Bureau’s latest report.

While the unemployment rate has declined, it’s still relatively high at 9.6 percent, according to the U.S. Bureau of Labor Statistics. But, as Greg Frick, partner at HFO Investment Real Estate, points out, “even when we had high unemployment, our vacancy was about 10 percent, so we didn’t fall that far. We’re not typically a boom-or-bust market; we’re really slow and steady.”

Some good news includes Intel’s commitment to invest in an existing plant in Hillsboro,

A perfect storm for profits: Last week we learned that Portland multifamily was the nation’s 3rd leading market for rent escalations; This week our fair city is celebrated for having the lowest vacancy rate in the nation.   Contact Rose City Commercial Real Estate immediately: rick@rosecitycre.com or 503.577.1034.

says Frick. And the market’s continued in-migration and urban growth are expected to help the market’s recovery.

In the multifamily arena, construction remains extremely limited. The market typically averages between 4,000 and 5,000 units per year, Frick tells MHN; in the last two years, about 750 units were permitted each year.

Meanwhile, concessions are burning off, and the market is experiencing between 5 percent and 10 percent rental growth. But, Frick adds, “we’re typically the lowest on the West Coast for rent numbers, so 5 percent in our market does not equate to the same dollar amount as some of the other markets.”

On the investment side of the market, Frick reports, “there’s been a lot of money chasing deals … [for the] Class A institutional stuff.” In-core Class A assets are trading at sub-5 cap rates, while suburban Class A deals have traded between 5 percent and 5.75 percent. Meanwhile, B and C asset values have held steady.

“We are seeing some B/C stuff trade, but it’s not at the fevered pitch you’re seeing in the Class A,” Frick tells MHN. “There’s institutional money chasing deals now, trying to get into this market because of the demographics and low vacancy.”

As far as the recovery, Frick points to the bond measures that are trying to get passed, and the resulting increase in taxes and utility charges, that could have a negative impact on the apartment market. “Those are a couple of expense items you don’t really have control over,” he notes. “Will we get enough rent growth to keep pace? How much will that be eroded from these added operational costs?”

While Portland’s livability factor poises it for a strong recovery, Frick notes, “we just need …[to] get some jobs in here and wage inflation so apartment owners can really capitalize on that increased demand.”

 

 

It is a bullish sentiment that gathered steam through 2010. With few projects initiated in 2009, there will be a shortage in the supply of rental apartments this year. Combined with a stabilizing economy, continuing uncertainty in single-family home prices, and echo boomers boosting demand, it will be heaven for multifamily in 2011.

Expect rents to grow at rates unseen since the early 1990s, when the sector experienced a similar pullback in construction. However, will these good times be sustainable? Or will heaven crash back down to earth as soon as 2012?

There is compelling evidence that effective rents will indeed post strong growth in 2011. Despite moribund economic growth in 2010, apartment vacancies fell sharply, ending the year at 6.6% after starting from a record-high base of 8%. Concessions that included subsidies for utilities and broker commissions as well as months of free rent were withdrawn swiftly.

This article is reprinted from National Real Estate Investor.  Their articles are insightful, timely and reliable. 

The time to buy is when the market is heading up.  All the signs are there suggesting the best multifamily climate in years.  To learn more about investing in Portland’s multifamily market, call Rick Bean at 503.577.1034 or contact him at rick@rosecitycre.com.

National effective rents grew by 2.3% in 2010, a healthy rebound given the record 2.9% decline in 2009. And this was when about 94,000 apartment units came on line and jobs were growing at a disappointing rate.

A rising tide …

Inventory growth will contract significantly in 2011. Reis projections add up to only about 51,000 units coming on line in 79 major metro markets. This is less than half of the

via Heaven for Multifamily in 2011, Closer to Earth in 2012.

Many of you know that a $1.5B  expansion is underway to extend the current lightrail system from Portland to Milwaukie.  You may not be aware that only 11% of the total funds are slated to compensate landowners for their losses. 61 businesses and 12 residences will be forced to relocate.  In all the government will be taking all or part of 129 parcels.  Many commercial brokers are licking their chops at the possibility of getting new clients…RCCRE is taking it a bit further.  We created PDX Lightrail Resources, a coalition of professionals focused on helping those impacted by the project.   Our group includes:

• Real Estate Lawyers with condemnation experience to fight for your rights and full compensation of your loss
• Commercial and Residential Brokers to assist with relocation and valuation
• Commercial Appraisers
• Residential Brokers
• CPAs to explain potential gains and losses
• Accommodators to assist with proper treatment of 1033 funds

Neither Rose City Commercial Real Estate nor PDX Lightrail Resources is fighting the creation of the Milwaukie leg of the system.  We think that Portland will benefit from the project near term through creation of much needed construction jobs and long term livability. But we are committed to making sure that those impacted recieve just compensation as required by Chapter 35 of the Oregon Revised Statues and the Federal Uniform Relocation Act.

Be aware that compensation is due not only for the whole and partial “takings”, but construction easements and other compensation items need to be considered as well!

To get a list of professionals that are part of PDX Lightrail Resources, please contact me at 503.577.1034, or send me an e-mail to: rick@rosecitycre.com.