Olympic Fever: Rental Real Estate Edition

Image courtesy of The Daily Mail

Today’s the day! The opening ceremonies will be broadcast tonight (click here for Universal TV’s full Olympic lineup), and we haven’t been this excited since we were watching a giant scroll unfurl in a Chinese stadium. But how have the Olympics affected the real estate, and rental real estate, landscape in London? Here’s a roundup straight from across the pond. (We’re really just writing this article so we can call apartments “flats.”)

So just how much do rents rise when the Olympics come to town?

According to Alex Johnson of The Independent, flats in Stratford (near the Olympic village) generally go for around £1,700 ($2,664) per month; but with the Olympics at hand, the average rent is now between £4,000 and £6,000 per week–that’s $9,400 for just seven days. Johnson reports that there are just about 300 apartments in Stratford open for “short lets” in that price range, as of Wednesday. Meanwhile, Stratford locals are thinking up all sorts of fun ways to make money during the next few weeks–one resident has turned her backyard shed “into a mini-sporting stadium where guests can stay for £40 per night.” There’s even a medal podium for photo ops! Check out The Independent’s Olympic property news roundup here.

That’s all well and good–but some Stratford property managers may have overestimated demand.

£6,000 is one thing–but £20,000 a month for a London flat is far different. And according to Jon McNeice of Belvoir Brentwood, some landlords decided to use the Olympics as a chance to send rents truly through the roof, hoping the demand would ensure a supply of guests with disposable income. “Some landlords have been asking for huge sums of money to rent their properties. One couple were asking for £9,000 a week and, although they were very confident this was achievable, their property is still unoccupied,” he told Property Wire this week. Read the whole story here.

But enough about the spectators. Where will the athletes be living?

The Olympic village is mysterious–what is it like to live for three weeks in a village chock-full of elite athletes? We’ll sit glued to our televisions, watching these athletes for hours–and yet, we never see where they live. That may be because where they live, it turns out, isn’t that glamorous. Olympic organizers have released photos of the Olympic village dorms, and while the bathrooms are nicer (do we recognize top shelf Ikea?), the bedrooms definitely leave something to be desired. We’re definitely getting college flashbacks from that coffee table and building facade. Red Solo cup, anyone?

Olympic villages are built for, well, the Olympics. So what happens to them afterwards?

Olympic villages are built to a fleeting purpose; but with all of that money invested in the area, it simply wouldn’t make sense to raze them when it’s all over. So what happens to all of those athlete apartments after the magic is over? In London, the village will be repurposed for practicality, and turned into affordable housing units. Nearly 6,000 people will fil the units in the current Olympic village, and other buildings will be repurposed into a school and medical facility. That’s all according to an article from ThinkProgress Economy–check out the full text here.

And that’s it from us until next week–rest assured we’ll have the Olympic theme music stuck in our heads (and our hearts) until then. Let the games begin!

 

The Buzz: Garage Apartments, Puget Sound Vacancies, and Multifamily Housing Starts

From single-family home to multi-family housing?

Will the tight rental market turn the single-family home into a relic of the past? According to the Wall Street Journal, it just might. While the zoning laws in many areas have long tried to restrict homeowners’ ability to turn empty spaces like garages and basements into apartments, as the rental market has tightened, many homeowners are now pressing for changes in those laws. Read the whole story at WSJ.com.

Morgan Stanley: “We believe the demand for rental properties will continue to grow.” 

According to the US Census Bureau, the rental trend is not exactly in its nascent stage. In fact, renter households have formed at a higher rate than new owner-occupied households for the past five years–and according to a new report, that’s not likely to change anytime soon. The headline quote, from Oliver Chang of Morgan Stanley, is good news for the builders who are counting on a steady supply of renters over the next few years. Read more from KTRE.com.

Q2: Apartment vacancies increased in Kitsap, Thurston, and Pierce counties.

Seattle-based Apartment Insights Washington has just released the vacancy numbers for the second quarter in three Washington State counties–and vacancies actually increased in these areas. Olympia’s vacancy rate rang in at 7.84%, while Tumwater hit 6.36% vacancy; across the three counties, vacancy rates rose from 6.68% in Q1 to 7% in the second quarter. Read more from The Olympian.

Commerce Department: Multifamily housing starts up 12.8% last month.

The article, out this week in the New York Times, covers all housing starts–and it’s all good news for builders. While single-family home starts rose 4.7% in June, multifamily housing starts rose a whopping 12.8%. Michael Gapen of Barclays explains, “housing continues to be the one sector of the U.S. economy that is outperforming expectations.” Read more at NYTimes.com.

Visions of Curb Appeal, from Those in the Know

Have you checked out the latest issue of the NAA’s Units magazine? Their cover article caught our eye this month, when they asked their members to share their thoughts on curb appeal: what makes a property irresistible from the very first glance? Management at some of the most appealing communities from around the country shared their thoughts with the magazine; each has a unique vision for their buildings. Excerpts from our favorites are below.

“Our curb appeal sets the tone for everything residents find inside. It beckons you in, piques your interest, and makes you feel welcome.”

–Monica Fife, Verona at the Reserve (Houston TX)

Judging from the photographs, this community has worked hard to create a lush, cool environment that cools and slows the pace of the city outside its grounds. Untamed Cypress trees, a fountain that looks almost as though you could swim in it, and a cool stone facade work in concert to welcome each newcomer.

“Our staff not only works for A&G, many proudly call A&G home. Everyone cares, and it shows.”

–Kathie Dzbinski, Islands of Fox Chase (Glen Burnie MD)

While this building doesn’t have the real estate in which to set a wooded drive like the last community, the landscaping they do have is both meticulous and completely homey–the flowers and small trees look as though you might find them in front of a quaint little cottage. It’s clear the idea of home has been taken to heart in the design.

“The Georgian is a St. Charles Avenue landmark with its unique features: English ivy, towering heritage oaks…all creating picturesque ambiance.”

–Jonathan Jones, The Georgian (New Orleans LA)

Settled rather imposingly into the historical Garden District of New Orleans, the Georgian rises as a wall of lush green ivy, with only a hint of the brick walls behind the foliage. The New Orleans-style lightposts, the classic sign, and the rich foliage all add up to a building that is classic…and yet somehow exotic, all at the same time.

Another intriguing, classic, ivy-covered building.

For photos and more information about each building–and plenty of other featured properties–check out this month’s issue of Units. In the meantime, what’s your philosophy when it comes to curb appeal? Weigh in below.

Ten Days of Buzz: July 8-18, 2012

It’s Ten Days of Buzz! This week, the news in the rental real estate world includes renovations to Port Gamble, new multifamily investment opportunities, ‘passive housing,’ and renting to buy…enjoy!

“We’re going to preserve what you love about Port Gamble, because this town is absolutely authentic.”

Jon Rose, President of Olympic Property. First look at new plan to develop Port Gamble, Seattle Times, 7.7.12.

“Some of that home price growth might be due to investors’ demand…The negative effect on the rental market would be lower if it is due to the investment market. I believe there are continued positive prospects for the rental market.”

Luis Mejia, director of multi-family research at PPR, a CoStar Group company. Multi-Family Investment Opportunities: Still to Come or Past its Peak? Commercial Property Executive, 7.9.12.

“While the term ‘green building’ often conjures images of bamboo floors and low-flow toilets, the passive house approach is about revolutionizing how our buildings perform, becoming quiet, comfortable, super-efficient, gracious spaces.”

Sam Jagerman, co-owner of Hammer & Hand. Check out Seattle’s first ‘passive house,’ Seattle Post-Intelligencer, 7.11.12.

“Now it seems that markets favoring sellers are often places where apartment developers are looking to build. So in this case rentals would benefit not from a weak housing market, but a strong one.”

Robbie Whelan of the Wall Street Journal. Will Rentals Thrive in Sellers’ Markets? The Developments Blog from WSJ.com, 7.12.12.

“The Seattle/Puget Sound Office market ended the second quarter 2012 with a vacancy rate of 10.8%. Tenants moving into large blocks of space in 2012 include Amazon moving into 320,704 square feet at West 8th.”

Justin Summer of the CoStar Group. Market Trend: Seattle / Puget Sound’s Office Vacancy Decreases to 10.8%, Costar.com, 7.13.12.

“We have a community chef’s kitchen that opens into a great room with pool tables and other games. It’s like the multimillion-dollar apartment you don’t have, but that you now have access to. You can bring in your own chef or cook yourself for a large dinner party.”

Kyle Warwick, a principal of Gate Residential, a US real estate firm. Real estate firm developing new kind of community, Boston Globe, 7.15.12.

“The demand for that property for sale is probably not going to diminish very dramatically in future years. So you could triple or quadruple your return on a rental while you wait out the prime sales time.”

Vicki Negron of Corcoran. Single-family rentals are gaining traction in New York, too, The Real Deal, 7.16.12.

“Historically, rent-to-buy has been a fragmented business restricted largely to individuals buying and renting out second homes as vacation homes. Now, the numbers that are trickling in point to a new trend among sophisticated real estate investors.”

Howard Roth, Global & Americas Leader of Real Estate for Ernst & Young. Is Rent-to-Buy Here for the Long Haul? GlobeSt.com, 7.17.12.

Five Ways to…Brush up on (and Shape!) Rules and Regulations

 Welcome back to Five Ways! Today we’ve got some different ways to keep apprised of the evolving world of state and local rules and regulations for landlords, and to help shape some of them as well.

1. Attend a meeting of the Housing, Human Services, Health and Culture committee.

Seattle City Council is now preparing to pass a final proposal for their mandatory rental housing inspection program, and the next meeting is actually today (2:00pm, City Hall). The meeting will be chaired by Nick Licata and will include a briefing and discussion on the proposal, which was put forth by the Department of Planning and Development. If you’re not able to attend the meeting, they are also holding an open comment period through Monday, July 23rd–submit your comments (and learn more about the proposal) here.

2. Read up on SB 6315, the new tenant screening requirements for landlords–it took effect on June 7th.

SB 6315, which took effect at the beginning of June, was “perhaps the most important byproduct to come out of the 2012 legislative session concerning landlords,” to quote Sean Martin of the RHA. The law’s intention is to provide applicants with information about what personal information will be accessed by landlords, and which of this information might result in an application being accepted or rejected, as they decide whether to fill out an application and pay the application fee. Check out this summary from the RHA for more information.

3. Attend a seminar or webinar to learn more about landlord-tenant law.

Whether you’re a brand-new landlord or you’re ready for an advanced course in landlord-tenant laws, there are seminars (in-person classes) and webinars (online lectures) available to keep your knowledge current. Upcoming seminars in Seattle include New Landlord Orientation, Introduction to Small Claims, Advanced Landlord Tenant Law, and more–click here for more information.

4. Utilize an online landlord resource center.

When working in the rental housing business, questions invariably come up–and that’s where online resource centers can be so helpful. The resource center from the Washington Landlord Association contains easily accessed information on a variety of topics, from evictions to vendors, while the RHA offers resources for both landlords and tenants.

5. Go straight to the source.

Seattle’s landlord-tenant laws and statutes can be found online on the Seattle Department of Planning and Development’s website. Information on rules and regulations are updated on a regular basis, and printed copies of the current information–in many languages–can be picked up at the office of the SDPD if you’d prefer to have a hard-copy.

The Buzz: Rents Rising Fast, High-Tech Amenities, and Generation Global

Reis Inc.: Rents rising “at a pace not seen since before the financial crisis.”

Reis Inc. has just released the numbers on rising U.S. rental rates–and they’re moving upwards pretty quickly. Asking rents hit an average of $1,091/month in the second quarter of this year, which is one percent higher than in the first quarter–and that’s the biggest one-quarter increase we’ve seen since back in 2007.

Average U.S. vacancy was also noted in the article; at 4.7% in the second quarter, it was the the lowest it’s been since the end of 2001. Finally, while vacancies and average rents varied around the country, the smallest rent increases, recorded in Rhode Island and Tennessee, still had rents jumping 0.7% in just one quarter–and that’s not a small increase by any means.  Read more in the Chicago Tribune.

Owning a home: It’s not the dream of “Generation Global.”

NPR caught our eye this week when they covered pollster John Zogby’s new book. According to Zogby, much of the current crop of Americans in their 20s and 30s “whose American Dream has moved beyond suburban homes and traditional nuclear families,” and even beyond the confines of our country.

Over 270,000 students studied abroad during the 2009-2010 school year, and that number is climbing–and these students (and students like them) are just as likely to join the Peace Corps as they are to stay in the US. With this emphasis on life experiences, owning a home or property becomes less important–instead, they are likely to rent. Read more at NPR.org.

What do tenants want? High-tech amenities!

While older buildings have their charms, new apartment buildings often work to find their way to a tenant’s heart. For Gen Y renters, that extra push just might have to do with technology. Multifamily Executive has published a list of the tech amenities today’s tenants are looking for.

Of course, the list includes familiar necessities such as ample bandwidth and well-stocked fitness centers–but it also goes beyond those standbys, including paperless leasing offices, smartphone docking stations in each unit, and even outdoor kitchens–that is, a greater emphasis on decks and patios, with grills and other cooking implements available outdoors. Read more from Multifamily Executive.

A different kind of vacation home floats into Seattle this week…

Thinking of purchasing a cabin or vacation condo? Why not one of the 165 apartments on The World, instead?

The Australian and African leg of The World’s path (from aboardtheworld.com)

The World, which is the largest privately owned residential yacht in, well, the world, floated into Seattle today, docking at Pier 66. According to the Seattle PI, the ship has visited 140 counties since 2002, when it first set sail. Residents cross the globe every 2-3 years–and if all that travel wears you out after awhile, there are also four restaurants, the nightclub, the tennis court, the driving ranges, and the cinema to keep you amused. While all of the apartments have been sold, some are up for resale. If you stop by the waterfront, you really can’t miss it–but perhaps you’d just like to read more from the Seattle PI instead.

Dupre + Scott: The Investment Report is out!

First off, happy Fourth of July! Where’d you watch the fireworks from? Have you seen the epic fireworks fail clip from down in San Diego yet? Honestly, we’ve always wanted to know what it would look like when all the fireworks went off at once.

Normally functioning fireworks

But that’s not what we’re here to talk about. It’s back to business now, because Dupre + Scott’s latest issue of Apartment Advisor is out, and it’s all about investing in multifamily properties. Get ready–here come the cap rates!

According to Dupre + Scott, the investment market “continues to strengthen” as rents rise and capitalization rates (cap rates) fall. This combination is pushing prices higher–but let’s back up for a moment, and look at what’s actually selling this year.

Year-to-date, $900 million in five-unit and larger buildings have sold this year in King, Pierce, and Snohomish counties. Compare that to June of last year at just $380 million, and we see that sales are rising considerably. Moving forward, Dupre + Scott project that 2012 sales will reach a total of $1.9 billion, up from $1.4 billion in 2011, and the Apartment Advisors are excited about that number: “that would make 2012 the fourth highest volume year on record. Ever.” 

A moment ago we mentioned that prices are rising; but just what is the average price of a multifamily building with five or more units? As of June this year, the price averages $126,525–that’s up from $119,099 at this point last year. Another factor that contributes to these rising prices is the Gross Income Multiplier–it’s been rising since the beginning of 2011, meaning investors are willing to pay increasing costs per dollar they earn.

According to Dupre + Scott, as long as cap rates and multipliers hold steady, prices will continue to rise–and if cap rates fall at all, or multipliers rise, prices will rise even more quickly. Currently, the average actual cap rate is at 5.8%, with the average actual multiplier at 10.3%. Due to all of these factors, Dupre + Scott are prepared to forecast “significant improvement in the market for investors this year and next.” Sounds like good news to us!

For more information, including a full breakdown on the cap rates and multipliers for 5-19 unit, 20-99, and 100+ unit apartment sales in each county, check out the latest issue of Apartment Advisor here. In the meantime, happy Friday–we’ve got a gorgeous weekend ahead! See you next week.