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.

 

The Numbers | End-of-2013 Forecasts from Marcus & Millichap

The Numbers: Rental Market Statistics from SeattleRentals.comWelcome back to The Numbers! This time around, we checked in with Marcus & Millichap for a  mid third-quarter update on apartment demand and development in the Seattle area. With so much of the year behind us already, the firm is ready to forecast the numbers for 2013–let’s see how they compare with last year’s stats. Will apartment demand keep pace with development?

3.3% projected job growth in 2013Good news from the employment sector–according to Marcus & Millichap, over 48,000 jobs have been added over this time last year–that’s already a 2.8% expansion, and it means jobs aren’t that far from 2008’s Q1 all-time high. By the end of the year, it’s predicted that job expansion will top 3.3%, or a total of 57,000 added jobs. So where are the gains coming from? The biggest gains are coming straight from the trade, transportation and utilities sector–that sector alone added over 12,500 jobs over the past four quarters.

Rental units opening in Seattle through 2015

Then we’ve got construction. According to this report, over 3,800 new units have been added to the market this calendar year–but development is easing a bit over last year, as 19% fewer multifamily building permits have been issued, compared to this time last year. Don’t expect too much of a drop in the supply, however; Marcus and Millichap are expecting 8,000 units to be completed by the end of 2013. Of the 20,000 units currently planned, developers have announced 2013 construction start dates for just 900 of them. We’ll see what pops up around town!

North Seattle / Shoreline vacancy is at just 1.5%

Oh vacancy, you’re the best–what with the way you’ve just kept dropping quarter after quarter lately. Strong job growth has lead to a vacancy rate in the Seattle Metro area of just 3.6%, and that’s an even smaller number in some submarkets–the North Seattle/Shoreline market wins the prize at just 1.5%. Vacancy is expected to rise a bit over the next few quarters, as new units come onto the market. Metro-wide, vacancy is expected to rise to 4.6% by the end of the year; we’ll find it to be a little lower or higher in certain submarkets.

Second quarter Seattle rent was $1,179

Finally, there’s rents. While vacancy has been dropping, rents have been growing–during Q2 of this year, available effective rents in the Seattle metro area jumped up 4.7%, to an average of $1,179 per month. The West Bellevue/Mercer Island submarket is where rents are highest at the moment, with an average of $1,865; meanwhile, rents in the Capitol Hill/University District/Ballard market hit $1,614. For the entire Seattle metro area, Marcus and Millichap estimate that available effective rents will jump a total of 4.9% by the end of 2013, to an average of $1,155. That’s a little down from last year’s spike of 6.1%, because of new construction; but it’s still a nice healthy increase.

That’s all we have for you this time around. Want more of the numbers? Check out Marcus & Millichap’s Third Quarter 2013 report on their website.

Seattle Centric: Historic Jobless Rate, Urban Gen-Y Renters, & Investing in Multifamily

Happy summer! Now that it’s officially apartment-hunting season, how will you celebrate? With a good power-washing, perhaps? Or maybe something more fun–it’s supposed to get into the eighties this weekend…Seattle CentricIt’s the first day of summer–and Seattle’s is the longest in the contiguous US!

Okay, so this story doesn’t have much to do with the rental market–but we’re just plain excited. Say what you will about Seattle weather, but we can pat ourselves on the back when it comes to the Summer Solstice. According to the Seattle PI, on June 21st, Seattle “has more daylight than any other major metro in the contiguous United States.” 15.59 hours of daylight, in fact. Take that, California! So how will you spend the longest day of the year? Is it time to spruce up the outside of a property, or will you take the day off? Rest assured that whatever you’re up to, you’ll have plenty of daylight to do it in. Read more.

Seattle jobless rate hits 4.7%

We know, we started out the last edition of Seattle Centric talking about the state jobless rate; but that was a whole month ago, and now we’ve got great news for Seattle unemployment. That’s right–while a year ago, we were looking at 7.3%, now, for the first time since 2008, the Seattle jobless rate has fallen below 5%. So what (or who) is to credit for this recovery? According to economist Paul Turek, it’s “the Boeing factor.” Also noted is the jump in construction. And the cherry on top? According to Maria Ramirez, an economist with MFR, a jobless rate of 5% or less can be defined as “full employment.” Congratulations, Seattle! Read more.

Seattle apartment market shaped by Gen-Y employees

And speaking of jobs, the Puget Sound Business Journal just featured an article about the current demand for smaller, more urban apartments–and how that demand is shaped by the jobs available in our city. Seattle-based companies like Nordstrom, Starbucks, Amazon.com, and the Bill & Melinda Gates Foundation are attracting young professionals who view the city as a land of opportunity; and these Gen-Y employees, who don’t yet have families, prefer smaller, more versatile apartments, located in walkable neighborhoods that are easily accessible from the office. Read more.

In a tough investment market, expert looks to rentals

Yikes: “This year’s stock market surge has stalled and the market is too choppy to provide any sort of reassurance,” journalist Christina Rexrode writes in a new AP article. So what’s a smart investor to do? The article polled five experts in the field to see what their suggestions were, and according to Mickey Segal, a managing partner at an investment firm in LA, the time is ripe for investing in the apartment market. Segal cites conditions which describe the Seattle rental market: the high demand and low supply in the current market, combined with the very tight supply on homes for sale–which, in some areas, is due to investor groups buying houses to turn into rental properties. Finally, development of new apartments in 2013 is scheduled to fall short of 2012 development, meaning multifamily will continue to be strong going into next year. Read more.

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.

Apartment Advisor Recap: The Investment Issue

It’s here, it’s here–the June issue of The Apartment Advisor, from Dupre + Scott! This issue was all about investments in the first five months of 2013; let’s see how it compares to 2012 and years past.Apartment Advisor RecapThese are just some of the most salient points from the new issue; as always, check out DupreScott.com for the comprehensive report.

Multifamily sales are currently up over this time last year–but projected sales for the year won’t outperform 2012.

In the first five months of 2012, $645 million in 5-unit or larger apartment buildings sold. Now skip ahead to the first five months of this year, when that number jumped to just under $900 million. When we annualize that number, it puts this year’s total sales activity at about $2.1 billion; in 2012, that number hit $2.7 billion. According to Dupre + Scott, “we don’t expect 2013 o outperform last year,” because 2012 sales were buoyed by capital gains tax changes.

Prices on these buildings are continuing their three-year rise.

So what are these 5-unit or larger buildings selling for, anyway? According to the Advisor, they’re currently averaging $141,389 per unit, up from $136,555 per unit averaged over 2012. That puts the price 3.5% up from last year’s average, which means prices are continuing on their three-year rising streak. Higher rents and lower mortgage rates are fueling the increase.

Cap rates have climbed above interest rates, signifying investors’ “concern about the potential for interest rates to climb in the future.”

Let’s back up a little–the relationship between cap rates and interest rates can be complex. According to Dupre + Scott, cap rates rise and drop due to many reasons, including supply and demand, changes in the cost of capital, and changes in buying pressure. Lately, cap rates have climbed much higher than interest rates. “Investors are taking advantage of today’s low rates, but [the difference] suggests they are concerned about the potential for interest rates to climb in the future.” Incidentally, this is a good place to note that assessed values, which fell over the past few years, are finally starting to catch up with price trends.

…Finally, some quick stats from the report

We’ve bulleted some statistics from the 5-19 unit sale findings below. For numbers on 20-99 and 100+ unit sales, as well as breakdowns by county, check out the latest Apartment Advisor.

Tri-County 5-19 Unit Sales

    • $91 million (in 74 sales) of these buildings have sold thus far this year; that’s up from $75 million (in 65 sales) at this time last year.
    • Average price is $134,023 per unit, up from $130,491 last year (a 2.7% jump).
    • Cap rates on these buildings have remained steady at 5.6%, up from their 4.6% low in 2007.
    • Averaged assessed value on these sales in 2013 is 88% of the sale price, down from 91% of the sale price in 2012.

Events Calendar: June & July 2013

With school letting out and summer officially upon us, let’s check in on the networking and educational events going on this summer for landlords and property managers in the Seattle area. A landlord’s work never stops–but as these local events can remind you, you’re part of a flourishing industry, and friends (and important contacts) can be made everywhere.Events Calendar

June 8th (tomorrow!): The WLA’s 2013 Spring Conference

It’s not too late to register for the Washington Landlord Association’s big spring event! Held at La Quinta Inn in Tacoma, this yearly, all-day event is open to guests and costs $35 if you pre-register online (less for members). The resources available at the conference are numerous and include presentations on rental management, fire alarms & sprinklers, cleaning up moisture damage, tenant screening, and more. Check it out here.

June 13th: The RHA presents New Laws and What You Should Know

Ever feel like you can’t keep up with the changing tides of landlord-tenant law? There’s always more to learn as the laws evolve, and that’s why the RHA is holding this two-hour seminar lead by Julie Johnson. This “quick overview” of changes that have occurred over the past year targets the laws that affect you, your business and your tenants. The seminar is from 5 to 7 pm, and registration is $45.00. Learn more here.

June 20th: City’s Rental Registration and Inspection Ordinance Stakeholders Meeting 

Did you know that all rental housing in Seattle will have to be registered with the Department of Planning and Development by December 31st, 2016? That’s the result of the new Rental Registration and Inspection Ordinance (RRIO). Luckily, the community can have a say in how the ordinance is implemented at the city’s monthly Ordinance Stakeholders Meeting. The next one is from 2-4pm at the Seattle Municipal Tower on June 20th, and it’s open to the public. Learn more here.

July 11th: Solving Problems with Tenants, from the RHA

We’ve all had those tenants that require more time and attention than the rest. In this three-hour seminar conducted by Sue Lewis, CPM, you’ll learn new tools for handling tenant hardships, emergencies, and problem behavior. Registration is $45; the event will be held on July 11th from 5:00 to 8:00 pm. By the conclusion of the seminar, you’ll know when to make a call, send a notice, or seek legal advice. Learn more or register.

July 17th: Meeting of the Seattle Public Utilities Water System Advisory Committee

If you like to stay involved in affairs of the city, you may want to stop by this meeting of the Water System Advisory Committee. This meeting is open to the public (and hey, you can always apply to sit on the committee if you’re really serious about it!). Seattle Public Utilities community advisory committees work to provide diverse and representative opinions and analysis on the issues that the utility departments face on a regular basis. Learn more.

July 17th: The RHA presents Keeping Your Rentals Straight

This one’s for all of you landlords out there who do your own bookkeeping. Julie Johnson will be on hand to introduce you to bookkeeping basics, including cash flow tracking, profit and loss worksheet setup, and creating record management systems. Managing multiple rentals? No problem–this seminar will teach you how to keep them straight. It will run from 5 to 8 pm on the 17th, and costs $45 to register. Check it out here.

 

 

Seattle Centric: Employment Numbers, Investment Trends, and Lots of New Development

 

Happy Friday! It may be raining, but that can’t dampen our spirits–we’ve got all sorts of good Seattle news for you today. Seattle Centric

Washington State employment is down again!

Good news this week from the Seattle Times–Washington State unemployment fell again in April. The new figure, hitting right at 7%, has fallen half a percentage point since 2013 began–and it puts unemployment at the lowest it’s been in over four years. The figure also puts us a little ahead of much of the country–according to Washington State labor economist Scott Bailey, unemployment is “continuing to improve at a moderate but accelerating rate, somewhat faster than the nation.” And the numbers within Seattle are even better; April’s unemployment rate for the city was just 5.1%, down from 7.3% one year ago. Read more.

From Dupre+Scott: Apartment investors are serious about 2013

Have you checked out Dupre+Scott’s new weekly video update? This week’s video is about apartment sales. Last year, investors bought $2.5 billion worth of apartments last year, making it the third-highest volume year in our region ever. So how are sales stacking up this year? Dupre+Scott compared the first four months of this year with the first four months of last year to find out. And the numbers are great–sales for January through April are up 26% over the same period last year, while the dollar amount of those sales is up a whole 32%. The average sale price is up, too; check out the video for all the details.

Big changes ahead for Cap Hill’s Bauhaus block

According to the Puget Sound Business Journal, East Pine Street, on Capitol Hill, is about to get quite the facelift. The block, home of Bauhaus Coffee and Books, is the future site of a mixed-use project by Kirkland-based Madison Development Project. The project will incorporate some currently existing architecture, including the Melrose Building, and will feature 14,000 square fet of retail, as well as 180 apartment units and underground parking. Read more.

Rezone approved–so what’s next for South Lake Union?

The City Council has voted, and the results are in–taller buildings will be allowed in South Lake Union. So what will the changing face of the area look like? According to the Daily Journal of Commerce, nine projects were waiting on the approval–that includes 976 apartment units, 1.98 million square feet of commercial space, and a hotel. Of note are Equity Residential’s planned twin seven-story apartment buildings at 222 Fairview Avenue North, totaling 497 units, and Greystar’s seven-story building that  will house 279 units at 400 Boren Avenue North. Read more.