Apartment Advisor Recap: Measuring Rental Performance

Apartment Advisor Recap - News from Dupre + Scott (www.duprescott.com)We always love it when a new Apartment Advisor comes out–the monthly digest from Dupre + Scott is chock-full of all the stats and data we rely on in the apartment industry. This month’s edition is all about measuring the performance of local properties. Since Dupre + Scott size up the rental market on a regular basis, you can utilize their data to see how your own property is doing against comparable rentals nearby. Here are some of the main factors to consider. Note that all data mentioned below is for buildings completed in or before 1999.

Operating Expenses

  • These vary due to many factors, including property tax rates and rent amounts.
  • If you’re looking for low operating expenses, head over to Pierce County–they’re averaging just over $4,600 per unit. Compare that with Eastside just over $5,700 on the Eastside!
  • Over the past 12 years, operating expenses for units built before 2000 have jumped over 40%. While actual costs vary, the increase remains fairly constant–compare Seattle at nearly 50% with Snohomish County at just 40%.

Investment Trends

  • Let’s talk sales. Currently, apartment sale prices are highest in Seattle, where the average is $160,000 per unit so far this year. Meanwhile, Pierce County units are selling at just $66,000.
  • Think Pierce County is a bargain? Keep price jumps in mind–the prices on these units climbed 83% over the past 12 years. Compare that with just a 74% climb in Seattle.

Rents: Trends, Inflation & Cap Rates

  • You might think Seattle is king when it comes to rents, but they’re actually highest on the Eastside right now–they’re averaging $1,250, compared with $1,090 in Seattle and $785 in Pierce County. Again, although rents in Pierce County look low, keep the climbing in mind. They went up 34% over the past 12 years, which makes the county second only to Seattle, where rents climbed 36%.
  • When comparing rents over time, don’t forget to factor inflation into the picture! Raw data, for instance, would have us thinking rents have shot up 800% since 1969, when in reality, they haven’t climbed much at all.
  • Finally, remember the important role cap rates play. As cap rates have fallen in recent years, buyers have been able to pay more for a set amount of income.

Development

  • Last but not least, we’ve got development trends. In Seattle, apartment stock has climbed 40% in the past 12 years; meanwhile, Snohomish and South King counties actually didn’t add any net stock.
  • For  numbers on how development is affecting your building, check out the report–it’s got info on all of the new units in King, Pierce, and Snohomish counties.

 

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The Green Report: “Cargotecture,” Efficiency Investors, & Solar-Powered Apartments

It may not officially be summer yet, but it’s definitely getting warm and gorgeous outside–and that always inspires us to think green. Let’s check back in with the world of eco-friendly rental housing. And two out of three stories this week are from here in Seattle, which can’t help but make us smile. Enjoy!

The Green Report

Cargotecture comes to Seattle: Could you live in a shipping container?

Okay, so Seattle architect Kai Schwarz’s newly-built single-family homes inside shipping containers are only available for sale–currently. But it’s only a matter of time before one of these stylish dwellings ends up on the rental market. Schwarz and partner Ann Corning co-founded ShelterKraft Werks, and the company has already completed one cargo-contained home, with two more on the way.

Inspired by the containers in the Port of Seattle, the completed model “cargo haus” is a 160 square foot studio selling for $35,000. Transformed with round windows, stainless appliances and a tiled bathroom, the home look stylish and cozy–at least for those of us without claustrophobia. Next up to be built is the two-bedroom, 640 square-foot house, which will utilize two shipping containers and sell for $72,000. Where to plant your cargo home once you buy it is another story–unless you want to try parking it in the Port and see if anyone notices. Read more.

Landlord? No, I’m just the Efficiency Investor.

investorWhen considering upgrades or a major overhaul to your building to make it eco-friendly, the cost can be daunting–even when you factor in the future efficiency and increased marketability. But what if there was a way to green your building without covering the whole cost yourself? If a pilot program launched by Seattle City Light and the Bulitt Foundation is successful, we may see investors helping to pay for eco-friendly improvements–with landlords, investors, and tenants reaping the rewards.

So just what does this pilot program mean for the environment? According to Denis hayes of the Bulitt Foundation, “by separating the efficiency investor from the building owner, just as we separate the wind farm developer from the rancher whose property the turbines are on, we can reduce the energy use in most existing buildings by more than 40%.” All of that, and also making investors money? Apparently so, according to the DJC. The pilot program  will involve just the Bulitt Building, to begin with–but could expand after that. Read more.

Apartments powered by 100% solar energy lure tenants–in sunny San Diego.

photovoltaic panelsUntil now, if you wanted to live your life in a home powered by the sun, chances are you’d have to buy a single-family home and cover it in solar panels–a costly proposition for any homeowner. But now, residents of San Diego can choose to rent their homes, and still enjoy solar power, in a multifamily complex “designed to be fully powered by the sun.

H.G. Fenton has finished building the first of Solterra’s four apartment buildings, which will house 114 units. Currently 80% leased, the apartments will feature other eco-friendly perks, including Nest thermostats and energy monitoring by smartphone for tenants–a feature which was only legalized in California last year. And these apartments don’t come cheap; prices start at $1,495/month for 741 square feet. It looks like tenants may be willing to pay a premium for the novelty of an “ecoluxury” unit. Read more.

Rental Tech: Crowd-Funded Real Estate, Spotify Apartments, & Tablet Leasing “Offices”

It’s time again for Rental Tech! We’ve got the latest on the technology that’s making tenants happier, landlord’s jobs easier, and the world a cooler place…it’s a fun time we live in, isn’t it? : )

Screen shot 2013-02-21 at 9.52.41 PM

Coming soon: Smart apartments complete with Spotify and iPad Minis

Spotify Logo

Is the true era of the smart home finally upon us? It is for the future tenants of a planned apartment complex in Australia. The Imperial will rise ten stories and house 96 units in its clean, stair-stepped design–but the true draw of this building lies in its technology. Each unit will come equipped with Push Controls, Sonos sound systems, and even integrated Spotify. And for easy control of all these nifty features, each apartment will come with a free iPad mini.

While many homeowners are investing in devices from the Smart Home genre–Nest thermostats and other fun toys–this is the first we’ve heard of this technology being integrated into rental housing. Welcome to the future!  Read more.

Crowd-funding…for rental real estate?

The SEC has always regulated investments fairly strictly–but according to a new article from the LA Business Journal, they are now “inching closer” to loosening those restrictions in ways favorable for crowd-funding, and real estate companies are taking notice.

Money - Black and White Money

Realty Mogul is one such company; they have now launched their site, which gathers investors to share stakes in an apartment building or commercial space. The minimum investment is $5,000, and while the site is currently limited to accredited investors, the SEC is expected to soon make changes that will pave the way for “almost anyone who can afford the minimum investment” to jump on board. Read more.

Design of Amazon’s Denny Triangle towers changes

Image representing Amazon as depicted in Crunc...

Are you tired of hearing about Amazon’s Denny Triangle towers yet? Just a quick update today. The towers, which are sure to influence the shape of downtown for decades to come, have just gotten a bit of a re-design.

The changes will primarily affect the shorter of the structures. Bryan Stevens, a Planning and Development spokesman for the city, said that Amazon has altered its design for the base of the high-rise “from a rectilinear approach to something more distinctive and identifiable.” We can’t wait to  see what they’ve got in store. Read more.

Are tablets “the leasing offices of the future?”

While we’ve been hearing about “the office of the future” for almost as long as offices have existed now, there’s no question that tablets and smart phones have given us access to many work tools that were previously tied rather permanently to a desk. In their March issue, UNITS, a publication of the NAA, delved into what tablets can mean for landlords and leasing companies–namely, a lot less time spend in the rental office.

English: An image of an iPad 2.

While equipping leasing agents and others with tablets can require a bit of an investment, having easy-to-use and current technology can make employees “poised and comfortable,” while signaling to potential tenants (many of whom work in the tech industry themselves) that your company is keeping pace. Tablets can especially assist with tours, when “I can let you know when we get back to the office” turns into “sure, let me check on that for you.” Read more.

Seattle Centric: Job Growth, Vacancy Rates, and…Big Bertha!

Spring is upon us, and changes are afoot in downtown Seattle–in fact, we have a visitor in town to help us with those changes. That’s right, Big Bertha arrived today! She’s a world-record-breaking tunnel drilling machine, sent over from Japan just to help our engineers drill the new Highway 99 tunnels. Want to check it out? The Seattle Times has the lowdown on where you can see the machine for yourself. But for now, enjoy the rental real estate news roundup we’ve put together for you once again–welcome back to Seattle Centric.

Seattle CentricSeattle PI: Job growth strong, vacancies low within the city

Remember back in February of 2010, when the unemployment rate bottomed out? The Seattle PI has the numbers on where we’ve gotten to since then–and the news is good. According to Apartment Insights, over 100,000 jobs have been added within the Seattle area; that’s 82.3% of the jobs lost over the course of the recession.

ID-10037845 (1)Jobs are one piece of the puzzle; vacancies are another. Currently, vacancy is at 3.8% in the Puget Sound area–that’s down from 4.7% last March. And in Seattle, the market is even tighter, with vacancy at just 2.9% (down from 3.1 last year). These numbers don’t include vacant apartments that are in lease-up or under construction; as new units open, we’ll keep an eye on the vacancy numbers and see how they do. Read more.

Bizjounal: Vulcan likely to come up short in South Lake Union re-zoning

South Lake Union SkylineWe’ve been hearing for awhile now about Vulcan’s proposed plans for towers up to 240 feet tall in South Lake Union; on Monday, the Seattle City Council members indicated their votes may not end up allowing that scenario. Instead, the three towers planned for the Mercer blocks would only be allowed to top out at 160 feet.

Meanwhile, over at 400 Fairview Ave N., Skanska USA would have better luck, due to the Mayor’s proposal to raise height restrictions in that part of the neighborhood to 240 feet. Oh, those South Lake Union politics! Two votes are ahead of the Council on these rezoning issues: The first is on April 22nd, and the next will follow at the beginning of May. Read more.

DJC: For urban living, it’s all about…Bellevue?

If you’re all about Seattle, you may not have noticed the following, but Lisa Picard of Skanska USA certainly did: Between 2008 and 2011, downtown employment in Bellevue jumped more than threefold, from 12,000 to 44,000. This increase, largely driven by Microsoft, has revitalized interest in downtown Bellevue as an urban center–and apartment market vacancies are now at just 3.1%, only a couple of points higher than Seattle’s.

Bellevue, Washington

According to Picard, Bellevue’s reinvention as the area’s “second urban center” is driving a collaborative new economy in the city. “Urban areas have become playgrounds for the human experience…this is not only changing where developers supply housing, but how we do it.” While much of Bellevue’s current apartment stock is comprised of condos for rent, the future will be about flexible spaces that allow renters to “customize their own social experiences.” Read more.

My Northwest: Seattle once again among top cities for college grads

158354481With June just a few months away, it’s time for all those plucky, soon-to-be college graduates to choose their own adventure and decide where they’ll begin life as a true adult. To help them out with that choice, Rent.com has released their annual list of the 25 top markets for college graduates, factoring in the cost of living, the average annual salary, and the unemployment rate.

Once again, Seattle made the elite top ten with a mean annual income of $54,800 and a median one-bedroom apartment price of $1,300. Other cities keeping us company in the top ten included Atlanta, Boston, Denver, Raleigh, and Washington D.C. Choose wisely, grads! Read more.

Apartment Advisor Recap: The Units are Coming!

Apartment Advisor RecapThe April issue of Dupre + Scott‘s Apartment Advisor is out–and it’s got some very interesting numbers in it this time around. We know apartment construction has been strong lately; with numbers on everything from vacancy rates to concessions, the Apartment Advisor is the perfect source to check in with on how all of this construction is affecting the local market. Today, we’ll be checking in on five main factors that reflect the state of the rental market. To find out more, head over to DupreScott.com for the full report.

1. Market vacancy in the Puget Sound region is down to 3.8%.

3.8%–that’s the lowest it’s been since 2007, and it’s only been this low three times in the past 30 years. Now as you’ll recall, market vacancy excludes properties in lease-up and those undergoing renovation. When we include those units, we get the gross vacancy, which is currently at 5.2%.

The’s the Puget Sound region as a whole–so where does Seattle fit into all of this? Lots of construction within the city itself means there is a much larger divide between the market and gross vacancies–market vacancy is currently at just 2.9%, while gross vacancy is at 8.0%.

2. Rents have shot up 5.5% in the past year.

When we talk about rent amounts in Seattle today, it’s important to note the difference between rents for existing units, versus rents for units that have just been built–there’s a real and measurable difference between them. While rents have gone up 5.5% over the past twelve months, when we look just at the rent amounts in existing units, this increase is a bit less, at 3.7%.

This difference is particularly noteworthy in certain Seattle neighborhoods where more new units have been going up–take Queen Anne, for instance. Rents have risen 17.1% in that neighborhood; but if you factor out new units, the increase is 8.2%.

Finally, let’s talk about the rents of the future: Over the next six months, local apartment managers plan to increase rents by 2.8%–increasing rent at a rate they haven’t matched since 2008. Looking at per-capita income over the next five years (as per-capita income has been strongly tied to rent growth since 1980), the potential exists for rents to continue to rise strongly.

3. 34,000 units are planned to open over the next five years.

Here’s the part where we talk construction numbers–and these numbers are big. Dupre + Scott put the number of units under construction or just completed in the region at 15,000, with work to start on 5,000 more before July 1. If things go as planned, 2015 should keep pace with 2014. Out of all of this construction over the next five years, 89% of it is expected to be within King County alone.

Some investors worry that the gap between rent amounts for new and existing units, as referenced above, will lead to problems leasing all of this new construction once it’s complete. After all, twelve years ago, rent on new units was 1/3 higher than rent on existing units–now, it’s a whole 50% higher. But with low vacancy in existing units and the amenities, novelty and appeal available with new units, renters are still flocking to these new buildings.

4. Only 20% of surveyed properties are currently offering concessions–but this number will rise.

Speaking of filling new units, we should talk concessions. The number of landlords and property managers offering concessions dropped quickly during the rental renaissance of the past few years. Currently, concessions are offered in just 20% of the units surveyed by Dupre + Scott. But concessions help to fill units, and in buildings completed in 2012 and 2013, we’re seeing concessions offered with 2/3 of the units. As newly-completed units continue to open, we are likely to see an increase in concessions.

5. The percentage of tenants paying for water, sewer, garbage and parking is continuing to increase.

Finally, there are utilities (water, sewer, garbage) and parking to talk about. Taken together, water/sewer/garbage costs in Seattle average $55 to $90 per month; currently, around 2/3 of Seattle landlords are passing water and sewer costs along to tenants, with 50% also charging them for garbage. There has been a real sea change over the past few years with respect to these utilities–between 2008 and 2012, utilities paid by the renter rose 50%.

Then there’s parking. Last year, 60% of surveyed landlords included parking in the rent amount; this year, that number has dropped to 50%. Meanwhile, the number of parking spaces per unit is decreasing in new construction. Between 2000 and 2011, there were an average of 1.3 parking spaces per unit; but with units planned and in construction between 2013 and 2016, this drops to just 0.8 spaces per unit. Perhaps it’s time for a Smart car to go with that micro-unit?

Ten Days of Buzz: February 24-March 5, 2013

Ten Days of Buzz

“They just can’t accommodate all these people. Some of them have just handed over all the reins altogether.” 

Will Baker, Senior VP with Walker & Dunlop. Big Real-Estate Firms Are Going to School, The Wall Street Journal, 2/24/13.

“The fastest growing city for good jobs outside of Texas was another technology capital, Seattle, which is expected to add 136,000 jobs over the next five years.”

Daniel Fisher, Finance writer for Forbes Personal Finance. Texas Dominates the Best Cities for Good Jobs, Forbes.com, 2/25/13.

“We think Seattle has a good story going. It’s a very good economy with lots of diverse drivers.”

James Delmotte, Senior VP of Grosvenor. Grosvenor buys Bothell apartment complex for $88M, Puget Sound Business Journal, 2/26/13.

“Everybody wants in this market. We will push forward and see more trade deals like [Aspira].”

David Young, Apartment Broker with JLL. Apartment building market firing on all cylinders in Seattle, Puget Sound Business Journal, 2/27/13.

“Landlords [in California] already have authority to prohibit smoking in their rental units, through a law implemented last year, but Levine’s bill would impose a mandatory ban statewide.”

Jim Sanders, writer for the Sacramento Bee. California bill would ban smoking in multi-unit housing, SacBee.com, 2/28/13.

“Outlays dropped 2.1 percent, the biggest decrease since July 2011, to a $883.3 billion annual rate, a Commerce Department report showed today in Washington. The median forecast of 45 economists surveyed by Bloomberg called for a 0.4 percent rise.”

Shobhana Chandra of Bloomberg News. Construction Spending in U.S. Unexpectedly Fell in January, Bloomberg.com, 3/1/13.

“A few days ago, I was reviewing some work [on] sustainable cities. The original draft stressed that dense living is the way to go. Wherever the word ‘dense’ appeared, I crossed it out substituted the word ‘walkable.’ …We also need city neighborhoods with nature, culture, good schools, green technology and green infrastructure.”

Kaid Benfield of the NRDC. Not All Density is Created Equal, The Atlantic Cities, 3/3/13.

“Some council members and residents want to lower the maximum height and reduce how wide the buildings could be. Councilmember Nick Licata said he will introduce an amendment to ‘shorten and slim down’ Vulcan’s towers.”

Marc Stiles, Staff Writer. Scope of South Lake Union rezone could get whittled down, Puget Sound Business Journal, 3/4/13.

“During the crisis, the multifamily line of business was effectively the GSE’s diamond in the rough, generating approximately $7 billion in profits between 2008 and the third quarter of 2011.”

Christina Mlynski of Housingwire Investments. FHFA aims to shield Fannie, Freddie from credit risk, HousingWire.com, 3/5/13.

The Green Report: No-Car Buildings, Green Standards, and the Smallest Apartments You’ll See Today

Happy March! It always seems like things start to speed by this time of year; February’s already gone and spring is on its way. Warmer weather always makes us think of renewal, and of greenery–so what better time to check in with the world of eco-friendly living? That’s right, it’s time again for the Green Report. Enjoy!

The Green Report

From Boston, an apartment building so eco-friendly that it bans cars

11971486861879163928ryanlerch_no_cars_sign.svg.medWe all want to do our part for the environment–and for many tenants in urban neighborhoods, that means walking, biking, and using public transportation whenever possible. But one proposed apartment project in Boston would go so far as to ban tenants from owning cars. Yup, you heard us right; according to the Globe, “tenants will have to sign an addendum to their lease that requires them to be car-less.”

The 44-unit building would include private gardens and an open greenway in some of the space that might otherwise have been devoted to parking. Transportation will be provided by Boston’s bus lines, and bikes and mopeds will be encouraged. According to the project’s architect, Sebastien Mariscal, “it just takes one building to change things.” But will tenants go for it? Only time will tell. Read more from the Boston Globe.

Speaking of cars…is the Washington gas tax about to rise?

Gas-CanCould the Washington gas tax soon go up by ten cents per gallon? It will if House Transportation Committee Chair Judy Clibborn has her way. Clibborn has proposed the tax hike as part of a transportation revenue package introduced last week. In order to pass, the increase would of course require a two-thirds majority in the House and Senate, or be voted into law by the people. Read more in the Seattle Times.

New green building standard approved by the ANSI

NAHB Logo 2010Here’s a mouthful for all of the multifamily builders out there: The 2012 ICC 700 National Green Building Standard (NGBS) has been approved by the American National Standards Institute. So just what does that mean? According to the news release from the NAHB, the updated standard “provides practices for the design and construction of all types of green residential buildings, renovations, and land developments,” and is the only nationwide standard approved by the ANSI.

Builders interested in incorporating the standards into their practices can purchase a copy of the NGBS through BuilderBooks.com, and in a further nod to sustainability, it’s now available in an e-book edition. So just what has changed since the last edition? According to NAHB Chairman Rick Judson, the new standard “raises the bar on energy efficiency,” and includes and expanded section on renovations. Read more from the NAHB.

“RecycleMania” in Texas dorms train students for a greener life

Recycle_Logo_by_Har1We’re honest, we’ll say it: not all of our recyclables always end up in the green bin at the end of the day. We might work harder to recycle if it were incentivized with a friendly competition like the one currently happening at the Arlington campus of the University of Texas. RecycleMania has residence halls competing to be the most recycling-friendly dorm; the winner holds on to the (recycled) trophy for a year. Ideally, the competition will ingrain habits that will stick with students when they graduate and become renters. Read more in UTA’s Shorthorn.com

When it comes to micro-housing, how small is too small?

From New York to San Francisco, micro-apartments have been hailed as the solution to high rents and low vacancies. In art exhibits and design contests, we’ve seen apartments that use small spaces to their advantage, making a comfortable living space for the tenant who appreciates efficiency. But how small is too small? Could you live, for instance, in an apartment that was only 5.6 square feet?

Image from Kotaku.com

Image from Kotaku.com

These “share houses,” which from outside look very much like lockers, come to us from–you guessed it–Tokyo. The compartments, which were recently showcased on a Japanese television show, have a bit of space to sleep, and to hang some clothes…and that’s it. Amazingly, tenants pay up to $600/month for the nicest compartments. Read more from OpposingViews.com.