2008 Fall Apartment Report

Transcription

the
A PA R T M E N T R E P O R T
2008 MMHA
Board of Directors
Thank you to all who contributed to the making of this report.
Jill Keoppel
A Square, LLC
A&G Rental Management, LLC
Action Management Inc.
Affinity Property Management
Affinity Realty
Alan Marie Properties, LLC
Alco Properties
Allen Crossing Apartments
Allied Group, Inc.
Alpine Property Management &
Maintenance
Altamont Summit Apartments
Amazon Properties, Inc.
American Condominium Homes
American Property Management
Andrews Management, LTD.
Ankeny Court
Annand Properties
Arcadia Management
Ashton Property Management
Aspen Square Management
Asset Management, LLC
Aumsville Mini Storage
Aurora Tech/APW Rentals
Autumn Park Apartments
Avila Inspection Group, LLC
B & B Investments
Barclay Square Apartments
Barrington Square
BB Management Group, LLC
Beaumont Properties
Bender Properties
Bill Lamb, Inc.
Black Irish Investments
Bluebird I, LLC
BMS Properties Inc.
BNS, LLC
Borgensgard LP
Boulders On The River Inc
Bowen Property Management Co.
Braun Pathways, LLC
Brice Properties
Brickey Properties, LLC
Bridgetown Properties
Bristol Equities, Inc.
Bunting Management Group
C&R Real Estate Services
C.R. Padot Investments
Calhoun, LLC
Cambridge Real Estate Services
Canby Court Apartments, LLC
Canyon Property Management, LLC
Capital Property Management
Service, Inc.
Capitola Commons
CareFree Property Management, Inc.
Carla Properties
Cascade Crest
Cascadian Village Apartments
CastleCrest Development, LLC
Central Bethany Development
Central Improvement Enterprises
Charholm Property Management
Chestnut Place Apartments
Chinook Way Apartments
Circum Pacific Properties
CK Property Management
Cmcyo Holdings,LLC
Coast Real Estate Services
Colonial East Apartments
Columbia Equities
Commerce Investment Inc
Commonwealth Real Estate Services
Conifer Group
Courtyard Properties
Crown Plaza Apartments
Crown Point, LLC
Crown Property Management
CSM Corporation
CTL Management, Inc.
Cypress Management, LLC
D & T Properties
D&D Development
Dalton Management, Inc.
DEBLAZE Enterprises
Deems, Inc.
Dieringers Properties, Inc.
Division Sunset Apartments
DJ Investment Holdings
Doris & Co.
DS & G Properties, LLC
Eberle-Sunset, LLC
Elkhorn Property Management, LLC
Elliott Associates, Inc.
Emmert Development Company
EP Property Management
Group, LLC
Equity Residential
Erickson Properties/Pacifica
Properties, LLC
Exit Realty, Your Next Move /
McFeters Real Estate
Exum Group, LLC
Faden & Christopher
Fanno Creek Village
FatBack Properties, LLC
Finama Manor, LLC
Fir Cones Limited
First Class Property Management
Fishback Engineering, LLC
Forest Hills Apartments
Forest View Apartments
Forsythe Development, LLC
Fort Vancouver Terrace Apartments
Foudy Properties, LLC
FRJ Development, LLC
G&P Nelson Capital
Management, LLC
G&S Estates, LLC
Galewood Commons
Gardenview Estates
Gateway Village Apartments
GCS
George & Alana’s Property
Management
Glacier Management
GLI Properties, Inc.
GMC Properties Corporation
Golden Star Invest, Inc.
Golfside Apartments
Grand Peaks Property
Management, Inc.
GSL Properties, Inc.
Guardian Management, LLC
Guild Apartments
GVE Apartments, LLC
Hall Equities Group
Hallinan Property Management
Hanks Property
Harprop, Inc.
Harr Properties
Harrington Homes
Harsch Investment Properties
Hayden Group, LLC
Hazelton Las Brias, LLC
HDT Properties
Hendricks & Partners
High Lakes Apartments
Highland Park
Hilltop Investment Co., LLC
HNR Real Estate
Hogan Woods Apartments
Homai Financial Group
Home Again Property
Management & Rentals, LLC
Hometown Property Management
House of Usher
Housing Authority of
Clackamas County
Housing Authority of Portland
Housing Authority of
Washington County
HSC Real Estate, Inc.
Hughes Prop Ltd Partnership
ICM Resources
II by IV Urban Development
ILP Corporation
Images Properties
Income Property Management
Interwest Properties, Inc.
Intution Real Estate Group, Inc.
Isacson Properties
Jake Associates, LLC
Jeffrey A. Polk Properties
Jennings & Co.
JK Management Co., Inc.
JLW Property Management
John Randolph Properties
Johnson Heights Condos
Joki Properties
JPM Real Estate Services
Judy DeLuca Enterprise
Junco Co.
JWP Properties, LLC
KBC Management
Kelsall Properties, LLC
Kenneth Alan Apartments
Kenton Hotel, LLC
Metro Multifamily Housing Association®
Keppel & Winquist, LLC
Kingswood Investment Co.
Kippie Investments, LLC
Knoll West Properties, LLC
K-Star
KW Multi-Family
Management Group, Ltd.
L&M Rentals
L&R Properties and Investments
L.J. Properties
Lafayette Properties, LLC
Lake Crest Limited Partner
Lamplighter Apartments
Landmark Apartments, LLC
Larry Grant Investment
Lawrence Investments Co., Inc.
Ledart Properties
Liberty Management Group
Lloyd Place Apartments
Lorig Management Services, LLC
LRG Enterprises
Macole, LLC
Madison Park Apartments
Magdefrau Properties, LLC
Mainlander Property
Management, CRMC
Marilynn Adams Property
Management
Mark Lee Construction
Markram Properties
Marsh Rental Properties, LLC
Matrix Holdings
Matson Properties, LLC
MB Rentals, LLC
McCann Properties, LLC
McKee Enterprises
McKenzie Court
McMonies, LLC
McWilliams Real Estate Services
Metro-Solid Waste & Recycling
Mid-Valley Property Management
Mike & Larry Kay, LLC
Miller Properties
Milligan Apartments NE, LLC
MJP Management
Monarch Apartments
Muddy Creek Properties, LLC
Mudrick Family Limited Partner
Munoz Sanchez Properties, LLC
Myers Property Management Inc.
National Apartment Association
New Haven Apartments, LLC
Nguyen Asset Mangement, Inc.
Northshore
Northwest Communities, LLC
Northwest Group Investments, LLC
Northwest Housing Alternatives
Northwest Plex Group
Oak View Terrace
Oleson View Apartments
Oregon Housing &
Community Services
Oswald Properties, LLC
Oswego Gardens Apartments, LLC
Pacific Northwest Property
Services, LLC
Palermo Properties
Paramount Apartments, LLC
Pardue Management
Park Hollywood Apartments
Parker Properties
Parkrose Properties
Parkrose Terrace
Patterson Properties
PEC Properties, LLC
Peters & Co. Real Estate Management
Peters EnPointe Properties
Pikes NW, Inc.
Pilcher Properties, LLC
Pineview Properties Inc
Pinewood Apartments
Pinnacle, an AMS
NW Company
Portland Community
Reinvestment Initiative
Portland Impact
Portland Towers Apartments, LLC
Powell Court Apartments
Premium Rental Properties, LLC
Prime Group
Princeton Property Management
Professional Property Management
Prometheus Real Estate Group, Inc.
Quail Ridge Apartments
921 SW Washington, Suite 772
Quantum Residential
R. Lawrence Properties, LLC
Raab Family LLC
Railton Properties
Raleigh Scholls Apartments Inc
Rappold Property Management, LLC
Reach Community Development Inc
Real Estate Solutions
Realty Management Advisors
Realvest Asset Management
Regency Management, Inc.
Regional Water Providers
Consortium
Residential Property
Management, Inc.
Resources NW, Inc.
Riel & Pillers
Right-Of-Way Associates, Inc.
Riva Properties, LLC
Riverstone Residential Group
RKB Properties
Rock Realty Group
Rockwood Holdings, LLC
Rogovoy Properties, LLC
Romero & Sons Property
Management, LLC
Rose Place Apartments, LLC
S.L.S. Properties, Inc.
Sabin Community Development Corp
Sandycrest Partners, LLC
Satellite Properties, LLC
Schaeffer & Associates, LLC
Schoen House Apartments
SCR Management LLC
Seamast Vista LLC
Semler Building, LLC
Sequoia Apartments
Shangri-La Corporation
Shara Alexander, LLC
Sheldon Development
Shelter Management, Inc.
Silverado Group, LLC
Simpson Property Group
SKL Properties, LLC
SkyNat Limited Partnership
Solares Homes
South Park at Bethany
Southpark Square Apartments
Sterling Management Group, Inc.
Studehouse, LLC
Subtext Media
Susbauer Properties, LLC
Tandem Property Management, Inc.
Taylene Court, LLC
Tellco Property Management
Terjeson Investments
The Lodges at Lake Salish, LLC
The Management Group
The Park at Fox Pointe, LLC
The Perotti Group
The Pines
The RW Fullerton Company
Theresa Terrace Apartments
Tokola Properties
Tree Crest Apartments
Trevor Anthony Apartments
Trinity Property Consultants
Tucci Investments
UDR
Urban La Residence
V.I.P. Property Management, Inc.
Valentino Bonser Properties, LLC
Valley View Estates
Village at Sunrise
Vista Highlands
Walchae & Associates
Walker Investment /
Hammond Residential
Warner Pacific College
Wells Rentals
PRESIDENT
Greg Knakal
Steve Rose
Bristol Equities
S E C R E TA RY
Portland, OR 97205
503 226 4533
TREASURER
For more information on MMHA or to comment on this report, please
visit us on the web at www.metromultifamily.com. The opinions
contained in this report are those of the authors and do not necessarily
represent the opinions or positions of MMHA.
16
Craig McConachie—C&R Real Estate Services,
Apartment Report Committee
Joan Carro
Riverstone Residential Group
I M M E D I AT E PA S T P R E S I D E N T
Larry Bricker
American Property Management
DIRECTOR
Trisha Fulwiler
J.D. Fulwiler & Co. Insurance
DIRECTOR
Andy Hahs
Bittner & Hahs
DIRECTOR
David Halseth
Background Investigations
DIRECTOR
Chris Hermanski
Mainlander Property Management
DIRECTOR
Paul Hoevet
Vacancy rates throughout the region are
continuing to inch up, however the
overall apartment market remains strong
and our region continues to enjoy a
healthy balance between supply and
demand. Average rent rates have seen
very little change since our Spring survey
and concessions are continuing to be
offered at properties located in softer
market areas. New apartment construction
remains slow, but has picked up from last
year, with projections of approximately
4,000 new units coming on-line in 2008.
Utility costs throughout the state are
escalating at a much faster rate than other
operating expenses. Landlords who have
elected to sub-meter or implement RUBS
programs have significantly benefitted
their bottom line.
HD Supply Facilities Maintenance
DIRECTOR
Craig McConachie
C&R Real Estate Services
DIRECTOR
Jeff Reingold
DIRECTOR
Deana Seuferling
GSL Properties, Inc.
DIRECTOR
Jami Sterling-Counard
Sterling Management Group, Inc.
DIRECTOR
Jim Wiard
Guardian Management LLC
DIRECTOR
Liz Zuanich
DIRECTOR
This report would not be possible without the dedication and
commitment of the MMHA staff and the Apartment Report Committee.
Thank you to the many contributors, writers and consultants who have
generously taken the time to provide this information.
STABLE MARKET CONTINUES
Barb Casey
Kennedy Restoration
Western States Development
Westridge Properties, LLC
Whispering Pines Apartments
Wigrich Farms, Inc.
Wildwood, Inc.
Wilfert Investments
Wilkinson, LLC
William Chan Property Management
Williams Downing, LLC
Wilsonville Summit
Windsor Properties
Woodland Park Estates
WPL Associates
WWL Corporation
mmha
the
VICE PRESIDENT
The larger apartments and higher-end
units are experiencing the highest
vacancy factors. This can be attributed to
the “shadow market” of unsold condo’s
and single family homes that have
entered the rental market, thereby
increasing supply. It is also indicative of
the slowing economy and the effect of
high gas prices, causing renters to choose
smaller, less expensive units, closer to
their employment.
On page 5 you’ll find a new graph that
we will be including. It tracks the overall
vacancy rate, by unit type, in the
Portland/Vancouver area, from the
inception of this report (July 2004). This
report also features new data regarding
the number of projects that are accepting
Section 8 vouchers, and the number of
projects that have instigated non-smoking
A PA R T M E N T R E P O R T
policies. Our opinion surveys indicate
that landlords are still optimistic about
future rent increases and their ability to
fill vacancies.
Portland/Vancouver
Studio units have the lowest average
vacancy factor (1.1%) of all unit types,
with 3BR/1 BTH at the high end (9.7%).
The Hillsboro area is the softest market in
the Portland area, reporting an average
vacancy rate of 6.2% and average
number of days vacant pushing 30. East
Vancouver is struggling and has seen the
vacancy rate jump from 6.6% to 8.3%.
Average rents have remained flat since
our Spring report. Downtown Portland
still has the highest rents ($1.27 s.f.) with
Outer NE and Clackamas at the low end
($.77 s.f.). Demand remains fairly strong
in most of our surveyed areas and new,
high-end, close-in projects are attaining
rent rates in excess of $2.00 per sq. ft. A
significant number of upper end units
(2,100+) are scheduled to come on-line
in the Pearl District, South Waterfront
and Downtown areas between now and
mid-2009.
Other Areas
points out that “the credit crunch is
clearly having an impact on apartment
sales activity due to tighter underwriting
standards, and more limited availability
of financing”. However, apartment
fundamentals are remaining solid and he’s
seeing noticeable increases in rents and
income.
The capital markets for commercial/multifamily
are experiencing a difficult period and
the fall-out from the Freddie and Fannie
continued on page 6
SURVEY SAYS!
Credit crunch having an impact
Shadow market of unsold
condos/homes
New construction remains slow
Landlords optimistic
1
2
3
SURVEYED AREAS
4
OREGON
The Eugene/Springfield and Salem areas
are continuing to perform well, but Bend
/Redmond is slipping. The collapse of the
housing market and the subsequent job
losses in the construction sector in
Deschutes County is having an impact.
Average rent rates remain very low ($.65
s.f.). Average rents are pushing up in
Salem and both Eugene and Salem are
enjoying vacancy factors below 3.5%.
FA L L 2 0 0 8
VOL 9
NON-MEMBER ANNUAL SUBSCRIPTION $ 99
1.
2.
3.
4.
Portland & Vancouver
Salem & Vicinity
Eugene & Springfield
Bend & Redmond
TA B L E O F C O N T E N T S
PORTLAND METRO MAP..............................................2
AVERAGE RENT PER SQ FT
AVERAGE MARKET VACANCY RATE ..........................3
SURVEY RESULTS ..........................................................4
AVERAGE DAYS VACANT ............................................7
CLARK COUNTY ............................................................8
EMPLOYMENT ..............................................................9
CENTRAL OREGON ....................................................10
CAPITAL MARKETS UPDATE ....................................11
What’s Inside
OPINION SURVEY ......................................................12
In a comprehensive overview of the
Portland area apartment market, Mark
Barry, from Mark D. Barry and Associates,
1
TREND REPORT ..........................................................13
PORTLAND APARTMENT MARKET ........................14
SOUTHERN WILLAMETTE VALLEY REPORT ..........15
14
6
7
9
10
11
12
16
North Portland | St. Johns
15
Inner & Central NE (Ptld)
14
13
Outer NE (Ptld)
Inner & Central SE (Ptld)
Clackamas
Milwaukie
Wilsonville | Canby
8
0.77
17
18
East Vancouver
5
0.79
West Vancouver
4
Troutdale | Fairview
Wood Village | Gresham
3
Outer SE (Ptld)
2
Oregon City | Gladstone
Lake Oswego | West Linn
Tigard | Tualatin | Sherwood
Beaverton
SW Portland
Downtown Portland
NW Ptld
1
0.79
0.78
0.78
19
20
AVERAGE MARKET VACANCY RATE % — PORTLAND / VANCOUVER AREA
3.66
3.10
2.18
2.89
2%
East Vancouver
West Vancouver
2.62
2.45
Outer SE (Ptld)
2.25
3.95
N Portland | St. Johns
2.64
3.29
3%
3.82
3.15
8.30
Outer NE (Ptld)
4%
4.89
4.17
Inner & Central SE (Portland)
4.05
Clackamas
4.49
Milwaukie
5%
6.22
6%
Wilsonville | Canby
7%
8%
SW Portland
9%
Downtown Portland
10%
11%
2.37
1.04
1%
0%
2
3
4
SALEM
5
6
7
EUGENE
8
9
10
11
SPRINGFIELD
AV G R E N T P E R S Q U A R E F O O T
12
13
BEND
14
15
16
$1.10
$1.05
$1.00
$0.95
$0.90
$0.85
$0.80
$0.75
$0.70
$0.65
$0.60
$0.55
$0.50
17
18
19
20
REDMOND
AV G M A R K E T VA C A N C Y R AT E
6.0%
5.5%
5.0%
4.5%
4.0%
3.5%
3.0%
2.5%
2.0%
1.5%
1.0%
0.5%
0.0%
0.86
0.77
0.65
3
3.38
3.37
2.70
Bend
Redmond
1
Eugene
Springfield
Mark D. Barry, MAI, is a real estate appraiser specializing in apartment
appraisal work in the Portland-Vancouver metropolitan area. He has
completed almost 5,000 apartment appraisals since starting as a fee
appraiser in 1983. He has a BA from University of California at
Berkeley, and an MBA in Real Estate from American University in
Washington, D.C.
0.78 0.79 0.77
Salem
However, the first half of 2008 saw $360.7 million in apartment
sales volume vs. $389.7 million for the first half of 2007. The first
half of 2008 saw eight sales of $24 million or more vs. five such
transactions in the first half of 2007. While the first half of 2008
saw 52 sales of apartments with a price under $5.0 million, this
is in comparison with 127 such sales for the first half of 2007.
Thus, the big slowdown in apartments sales activity in YTD
2008 has been in apartments with 50 units and under.
In conclusion, a flat economy, increasing unemployment, very
slow single-family construction, high inventory levels of
residential properties for sale, and a decline in the median
single-family prices characterize our market for YTD 2008. In
addition, there has been a noticeable slowdown in apartment
sale transactions, which is partially offset by greater sales
activity of larger, high profile complexes. However, apartment
values are showing some increases, and cap rates are down
slightly from a year ago. The apartment fundamentals remain
solid, with below normal vacancies, and noticeable increases
in rents and income. Increasing expenses continue to be a
challenge, particularly utilities.
0.84
0.90
}
Apartment Sales Activity: The first half of 2008 saw 65
apartment sales. This is in comparison with 139 apartment
sales for the first half of 2007. Thus, the credit crunch is clearly
having an impact on apartment sales activity due to tighter
underwriting standards, and more limited availability
of financing.
Expenses: Most operating expenses, with the exception of
insurance and advertising, are creeping up. Utility costs have
shown double digit increases on the majority of appraisals I
have completed in YTD 2008. I expect 2009 to be a tough year
for owners of apartments with central utilities.
0.84
0.92
1.00
}
Apartment construction remains slow by historical standards,
but has been more active in YTD 2008 than in recent years due
to favorable fundamentals. Permits have been issued for 2,249
apartment units in the four county metro area through July
2008. Thus, we should see around 4,000 new apartment units
for the year. Around 83% of the YTD 2008 permits are in
Multnomah County, with Trammel Crow Residential and some
subsidized projects accounting for well over half of the
construction. The balance of the activity is concentrated in
Washington County, with virtually no new apartment
construction activity in Clackamas County or Clark County.
Rents and Income: The latest MMHA data as well as
information from RealFacts shows an increase in rents of just
over 5% in the last year on a per unit per month basis. Studios
and two bedroom townhouse units are showing the largest
increases, while one bedroom units are showing the smallest
increase. The actual income for YTD 2008 is clearly up all over
the metro area. Typical increases I see range from 3% to 6%.
0.84 0.83
0.79
Beaverton
Single Family and Apartment Construction: 2008 will be the
slowest year for single-family construction in our market in
three decades! Permits have been issued for just under 2,500
homes through July. Thus, we should see around 4,000 new
single-family homes for the year, or well under half of the
average number of homes added per year over the last decade.
Aloha
The apartment market in Portland and most other areas of the
country has been immune to problems occurring in the single
family and condo market. In my opinion, the main reason that
the apartment market here has been so healthy is that fewer
people can afford to buy houses, and are forced to rent. The US
Census Bureau recently reported that around 66% of Oregon
households are homeowners, which is a decline from the peak
of 69% in 2004.
0.82
Aloha
Residential Market: The Portland area single-family market
was one of the last in the nation to head south. The median
single-family sales price is now down 7.3% over the last year,
with a ten-month inventory of homes. The condo construction
and condo conversion market has come to a virtual halt, with
inventories estimated at 2.5 to 3.5 years based on the slower
recent sales activity.
0.83
Bend
Redmond
Vacancies: The Fall 2008 MMHA survey shows a slight up tick
in apartment vacancies. I attribute this to a slower economy,
some doubling up or moving home, many new row houses or
condominiums being converted to rentals, and some apartment
construction.
1.13
Hillsboro | N of Hwy 26
Portland Economy: In recent months, our economy has
stagnated. We have added just 3,000 non-farm payroll
employment jobs over the last year, and have seen our
unemployment rate increase from 4.9% in July 2007 to 5.5% in
July 2008.
1.27
Hillsboro
N of Hwy 26
APARTMENT FUNDAMENTALS
$1.30
$1.25
$1.20
$1.15
$1.10
$1.05
$1.00
$0.95
$0.90
$0.85
$0.80
$0.75
$0.70
$0.65
Eugene
Springfield
The big news impacting the real estate market in YTD 2008 has
been the problems in the single-family market, a much tougher
real estate lending environment, and an obvious slowdown in
the economy. So what has happened in the Portland area
apartment market? The purpose of this article is to provide an
update on the Portland area apartment market as of mid 2008.
AVERAGE RENT PER SQUARE FOOT $ — PORTLAND / VANCOUVER AREA
NW Portland
Mark D. Barry, MAI
Apartment Values: The median sales price per unit of an
apartment in the first half of 2008 was $78,362 vs. $70,000 in
the first half of 2007, or almost a 12% increase. However, this
is misleading due to a high number of sales of larger, newer
high-end apartments in YTD 2008. If one eliminates the sales
of newer, larger apartment communities, and instead looks at
all of the sales of apartments of 100 units and less and built
prior to 2001, the increase is closer to 3% over the last year. In
addition, cap rates have declined by 5 to 15 basis points, with
a median cap rate of 6.06% for the YTD 2008 sales.
Salem
MID YEAR 2008 PORTLAND AREA
APARTMENT MARKET UPDATE
OPINION SURVEY
PORTLAND / VANCOUVER METRO AREA
MAP
# OF
AREA NAME
FEWER
SAME
MORE
EASIER
SAME
ALL
AVG MARKET VACANCY RATE %
AVG RENT PER SQ FOOT $
AVG RENT PER UNIT TYPE $
SUM OF UNITS SURVEYED
3.10
0.77
3.17
0.77
NW Portland
Aloha
Aloha
484
642
Beaverton
Beaverton
2.89
1.00
2.81
1.01
Downtown Portland
Downtown Portland
SW Portland
SW Portland
899
1247
1.04
0.90
1.25
0.87
Wilsonville | Canby
Wilsonville | Canby
192
240
Milwaukie
Milwaukie
Clackamas
Clackamas
2.37
0.78
3.43
0.76
Inner & Central SE Portland
Outer SE Portland
Outer SE Portland
1226
1514
Gresham
Gresham
8.30
0.78
6.60
.078
Outer NE Portland
Outer NE Portland
OUTER NE (PORTLAND)
17
?
Inner & Central NE Portland
In looking ahead
six months, as
compared to today,
do you think filling
vacancies in your
property will be
West Vancouver
East Vancouver
Bend | Redmond
Salem & Vicinity
Eugene | Springfield
15
INNER & CENTRAL
NE (PORTLAND)
18
26
NORTH PORTLAND /
ST. JOHNS
19
11
WEST VANCOUVER
20
How do you rate
the number of
renters looking for
apartments at this
property, as
compared to six
months ago
783
1363
REPORT
CHANGE STUDIO
1 BED
1 BATH
2 BED
1 BATH
2 BED
2 BATH
2 BED
TWNHS
3 BED
1 BATH
3 BED
2 BATH
HARDER
16
NW Portland
SPRING 08
DATA
PROP
18
EAST VANCOUVER
6
-2.21%
0.00
0.00
1.14
466
15
2.68
0.86
547
149
4.29
0.76
645
140
1.80
0.69
664
111
0.00
0.72
673
21
6.25
0.72
758
32
6.25
0.65
775
16
+2.85%
-0.01
5.00
1.29
611
100
2.14
1.02
635
561
3.92
0.94
780
153
2.53
0.87
768
79
—
—
—
—
100
1.00
850
1
0.00
0.92
1093
5
-16.80%
+0.03
0.00
1.24
518
46
0.00
0.97
621
79
3.28
0.77
659
61
—
—
—
—
—
—
—
—
0.00
0.69
625
6
—
—
—
—
-30.90%
+0.02
0.00
1.14
580
30
2.37
0.87
602
465
2.41
0.78
710
249
2.13
0.76
834
328
0.00
0.63
565
16
0.00
0.64
600
33
4.76
0.73
935
105
+25.76%
0.00
0.00
1.30
455
4
3.98
0.85
638
176
7.94
0.77
700
126
11.04
0.79
789
335
0.00
0.66
795
30
0.00
0.53
690
2
6.60
0.80
1009
110
West Vancouver
TOTAL AVG MARKET VACANCY RATE
3.58
3.32
+7.73%
1.15
3.09
4.06
3.71
6.23
9.70
6.38
East Vancouver
TOTAL AVG RENT PER SQ FOOT
0.86
0.87
-0.01
1.25
0.94
0.83
0.82
0.77
0.80
0.77
Bend | Redmond
TOTAL AVG RENT PER UNIT TYPE
537
624
711
838
834
794
966
366
471
85
307
275
109
38
57
89
24437
32845
1193
8441
7159
4782
618
536
1708
1.92
1.25
3.91
0.83
2.73
0.73
6.71
0.76
—
—
0.00
0.76
0.00
0.74
450
529
608
686
—
605
765
52
179
587
164
—
13
42
0.00
1.11
2.06
0.95
5.56
0.80
0.65
0.76
0.00
0.69
0.00
1.01
4.50
0.81
436
25
566
486
624
468
830
155
825
30
1040
3
1020
200
Salem & Vicinity
TOTAL SUM OF PROPERTIES SURVEYED
TOTAL SUM OF UNITS SURVEYED
OTHER AREAS
EASIER
SAME
DECREASE
HARDER
NW Portland
NW Portland
SAME
SALEM & VICINITY
INCREASE
20
3.38
3.29
+2.74%
0.77
0.70
+0.07
1037
1761
3.37
0.86
3.58
0.87
1367
1730
EUGENE / SPRINGFIELD
18
Aloha
Aloha
Beaverton
Beaverton
Downtown Portland
Downtown Portland
SW Portland
SW Portland
Wilsonville | Canby
Wilsonville | Canby
Milwaukie
Milwaukie
Clackamas
Inner & Central SE Ptld
Outer SE Portland
Outer SE Portland
Gresham
Gresham
2.70
1.76
+53.41%
0.00
0.00
2.83
3.33
12.50
—
0.00
0.65
0.63
+0.02
185
170
0.62
310
1
0.64
415
12
0.60
535
106
0.71
748
30
0.61
520
8
—
—
—
0.61
754
28
TOTAL AVG MARKET VACANCY RATE
3.15
2.88
+9.38
0.64
1.99
3.71
3.56
6.25
0.00
1.50
Clackamas
TOTAL AVG RENT PER SQ FOOT
0.76
0.73
+0.03
0.99
0.81
0.71
0.74
0.65
0.89
0.72
TOTAL AVG RENT PER UNIT TYPE
399
503
589
755
673
823
847
13
BEND / REDMOND
TOTAL SUM OF PROPERTIES SURVEYED
TOTAL SUM OF UNITS SURVEYED
Outer NE Portland
How do you
rate filling your
vacancies today
for this property as
compared with six
months ago
?
West Vancouver
East Vancouver
Bend | Redmond
Salem & Vicinity
How do you expect
rents in your
property to change
in the next six
months as
compared with
now
?
-5.87%
-0.01
45
48
8
23
35
19
2
4
14
2589
3661
78
677
1161
349
38
16
270
Outer NE Portland
*Surveys received from Sec 42, Sec 8 and other subsidized affordable housing programs are not included in the current survey data.
VACANCY RATE SINCE 2004
West Vancouver
14
East Vancouver
12
Bend | Redmond
10
Salem & Vicinity
8
6
STUDIO
1 BED/1 BATH
2 BED/1 BATH
2 BED/2 BATH
2 BED TH
4
3 BED/1 BATH
2
3 BED/2 BATH
0
*Includes: Troutdale, Fairview, Wood Village and Gresham
12
OCT 04
APR 05
APR 06
OCT 06
APR 07
5
OCT 07
APR 08
OCT 08
The sector hurting the most from the currently slowing housing
market is natural resources, mining, and construction. This
sector is heavily dominated by construction. In 2007, the sector
comprised 11.6 percent of the county’s nonfarm payroll
jobs—almost twice the share in Oregon (6.5%) or the nation
(6.1%). The sector has long accounted for a larger share of the
county’s jobs—going back to 1990 when natural resources,
mining, and construction accounted for 7.2 percent, while in
Oregon the industry accounted for 5.3 percent.
The fortunes for employment in natural resources, mining, and
construction turned in early 2006 when year-over-year growth
peaked at 24 percent (Graph 1). Since then there has been a
steady decline in year-over-year employment growth, actually
going negative in early summer of 2007 and staying there ever
If recent building permits are any indication, a further decline
of employment in this industry can be expected. Through the
first half of 2008 the county recorded 357 new single family
permits. That compares to 1,061 in the first three months of
2003, 1,478 in 2004, 1,783 in 2005, 1,830 in 2006, and 974 in
2007. That’s a decline of 63 percent from last year and just
one-fifth of the permits issued in the first half of 2006.
Steve Williams is a Regional Economist for the Oregon Employment
Department, covering Central Oregon. He produces and analyzes
employment statistics, including the unemployment rate and monthly
job growth in the region’s major industries. Steve has an undergraduate
degree in Economics from Willamette University. He started his career
with the Employment Department 5 years age, the last 3 of which have
been spent analyzing and reporting on Central Oregon’s employment
and unemployment trends.
GRAPH 2
11.7
15.59
13.2
10.73
10
23.22
20.52
16.84
Bend | Redmond
Salem
E Vancouver
West Vancouver
Outer SE (Ptld)
20.23 19.48
13.75
Outer NE (Ptld)
Clackamas
23.46
12.96 12.72 14.25
Milwaukie
15.22
18.51 17.07
39.46
15
Wilsonville | Canby
20
19.14
25
29.16
Beaverton
30
35
SW Portland
40
Downtown Portland
45
23.31
8.76
7.69
5
0
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
}
Deschutes County’s over-the-year employment growth slowed
to 1.0 percent in June. The slowdown began in 2007 when the
county was dethroned as Oregon’s fastest growing county, a
title it held between 2004 and 2006. In 2007, Deschutes was
the sixth fastest growing, adding 2,100 jobs. Although the
county has cumulatively outperformed every other area in
Oregon over the past seven years, it is currently feeling the
effects of a drastically slower local housing market. As they say,
the bigger they are the harder they fall, or in this case the faster
they grow the greater the potential for decline.
50
Aloha
Oregon Employment Department
Stephen C. Williams—Regional Economist,
Looking at annual data Deschutes County’s natural resources,
mining, and construction employment has grown by over 250
percent since 1990, while the state’s has seen a respectable 70
percent growth and the nation close to 40 percent (Graph 2).
The remarkable thing here is that the industry’s employment
shot up over 150 percent from 2002 to 2006. That rate of
growth is likely unsustainable in any market and that, coupled
with a large inventory of homes on the market, is probably the
reason employment leveled off in 2007. With the trend in the
first half of the year, an even larger drop is expected in 2008.
AVERAGE NUMBER OF DAYS VACANT — PORTLAND / VANCOUVER AREA
55
NW Portland
since. In 2007, the industry recorded 30 fewer jobs than in
2006. This decline was followed by the state and national trend,
with both peaking in early 2006 and going negative during
middle to late 2007.
NATURAL RESOURCES,
MINING AND CONSTRUCTION
EMPLOYMENT TAKES A HIT
OUTLYING AREAS
“Filling vacanies is harder due to more applications denied
based on property debt and negatie rental history.”
2006 HOUSING AFFORDABILITY
SECTION 42 SURVEY RESULTS
MAXIMUM MONTHLY RENT
Including utilities by median family income with a housing burden of 30%
NO. OF
BEDROOMS
HOUSEHOLD
SIZE
30%
50%
60%
GROUP HOME
.75
263
439
527
TOTAL # OF PROPERTIES = 74
80% 100%
702
878
UNIT TYPES
FALL 2008
TOTAL # OF UNITS = 2860
VACANCY
RATE (%)
AVG. RENT
PER SQ FT ($)
STUDIO
2.73
1.05
4.38
0.89
0
1
351
585
703
936
1171
1 BED / 1 BATH
1
1.5
376
627
753
1003
1254
2 BED / TH
0
0.57
2
3
451
753
904
1204
1505
2 BED / 1 BATH
13.67
0.73
3
4.5
522
870
1044
1391
1739
2 BED / 2 BATH
2.87
0.76
4
6
583
970
1164
1553
1940
3 BED / 1 BATH
3.92
0.63
5
7.5
643
1071
1284
1713
2141
3 BED / 2 BATH
5.51
0.62
TOTALS
5.21
0.73
Figures are rounded to the nearest $1.00
GRAPH 1
MEDIAN INCOME FAMILY OF FOUR
Portland $63,800
HOUSEHOLD
SIZE
30%
50%
60%
80%
100%
1
14,250
23,750
28,500
38,000
46,850
2
16,300
27,150
32,600
43,450
53,500
3
18,350
30,550
36,650
48,900
60,200
4
20,350
33,950
40,750
54,300
63,800
5
22,000
36,650
44,000
58,650
72,250
6
23,650
39,400
47,250
63,000
77,600
7
25,250
42,100
50,500
67,350
82,950
8
26,900
44,800
53,800
71,700
88,300
(Based on HUD Portland Area Median Income as of Dec. 31 2007:
$66,900 for a family of four. Figures are rounded to the nearest $50.00)
“I’ve had about 30 calls in the last month from people looking for Sec. 8 housing...”
10
7
SOUTHERN WILLAMETTE
VALLEY REPORT
PORTLAND METRO AREA
Brian K. Miles, CPM, CCIM
A snapshot of the Southern Valley today looks like this: low, low
vacancy; no concessions to speak of; rent increases more the
norm than not (although not substantial increases) and few new
construction units in rent up.
The economic climate has tenants to settle down. Lending
institutions are now requiring real down payments and
straightforward qualifying to purchase a home. That has taken
the fun out of home buying for the time being. All this has the
landlords smiling and rightly so. Theirs has been a tumultuous
multiple-year run of turn over and concessions.
Landlords looking to push rents need to remember that their
rents are part of a budget process that is impacted by rising
utilities, gas, food and credit costs. Six months ago I wrote about
higher end units having vacancy and that was a reverse of the
previous history of the lower end units carrying most of the
vacancy. With rent and vacancy stabilized, pushing rents too
hard might cost more than it is worth. Vacancy or less than
qualified residents is expensive in the long run. New
construction should now become the existing landlord’s friend
and they should wish them much success!
Salem/Keizer and Eugene/Springfield have several projects in
the planning stages of development. Albany also has units “in
the works”…finally. Corvallis does as well. As the new units
come into the market place, they have to push rents to justify
their existence. They need to have higher rents to get financed
and to make any return on investment. If they need higher rents,
they take your property with them in some fashion. Now, with
a strong market and a very manageable amount of new units “in
the pipeline” or under construction, that is truer than ever.
1
2
3
4
5
6
7
8
9
10
NW PORTLAND
HILLSBORO / NORTH OF HWY 26
ALOHA
BEAVERTON
DOWNTOWN PORTLAND
SW PORTLAND
TIGARD / TUALATIN / SHERWOOD
LAKE OSWEGO / WEST LINN
WILSONVILLE / CANBY
OREGON CITY / GLADSTONE
11
12
13
14
15
16
17
18
19
20
MILWAUKIE
CLACKAMAS
INNER & CENTRAL SE (PORTLAND)
OUTER SE (PORTLAND)
TROUTDALE / FAIRVIEW / WOOD VILLAGE / GRESHAM
OUTER NE (PORTLAND)
INNER & CENTRAL NE (PORTLAND)
NORTH PORTLAND / ST. JOHNS
WEST VANCOUVER
EAST VANCOUVER
increase to some degree. Some increases are more aggressive
than others. Those sales also helped to push the rental market.
Sales have slowed down. They are occurring, but not at the rate
that we have seen over the last several years. The same issues
that have hit the homebuyer have come to pass with the
apartment investor. Financing is difficult in today’s
environment. We need to also recognize that these lending
constraints will impact our properties with future loan calls and
refinance needs.
In summary; I believe that landlords now need to work as
diligently as they did in the lean, tougher, turnover times. They
need to be cautiously optimistic in their rents. They need to
exercise good judgment with regard to spending and
maintaining their properties on the expense side of the ledger.
Manage with long-term thinking and benefit now.
Your vacancy, your cash flow, your values and finally your
banking needs depend on it.
Brian K. Miles, is the Principal Broker of SMI Commercial Real
Estate, LLC. He is a Certified Commercial Investment Member (CCIM)
amd Certified Property Manager (CPM) and has been involved in
income producing real estate since1990. A principal of
Shelter Management, Inc. since 1993, he founded SMI Commercial
Real Estate in 2004 and has listed and sold approximately
$100,000,000 of real estate.
DO YOU OFFER INCENTIVES?
Also affecting the rental market is apartment sales. Rarely has a
sale happened in the last 5-10 years that did not require a rent
MAP AREA
NW Portland
18.52%
SW Portland
15.49%
Tigard/Tualatin/Sherwood
Milwaukie
Clackamas
0%
7.14%
2.94%
Troutdale/Fairview/Wood Village/Gresham
15
31.82%
20.99%
3.92%
Inner & Central NE (Portland)
0%
North Portland/St. Johns
0%
17.39%
0%
10.00%
Outer SE (Portland)
3.92%
0%
1.75%
11.29%
0%
6.06%
0%
0%
West Vancouver
21.74%
East Vancouver
22.58%
Bend/Redmond
16.92%
14.29%
1.90%
Eugene/Springfield
6.25%
0%
0%
Salem/Vicinity
17.46%
0%
25.77%
Wilsonville/Canby
Oregon City/Gladstone
34.69%
37.93%
7.27%
Downtown Portland
Lake Oswego/West Linn
15.09%
32.50%
Aloha
Beaverton
FALL 2008
6.25%
Hillsboro/North of Hwy 26
Outer NE (Portland)
2
SPRING 2008
7.89%
16.33%
0%
34.48%
36.84%
0%
8.33%
0%
SURVEY RESULTS—SEPTEMBER 2008
TREND REPORT : PORTLAND METRO AREA
PORTLAND / VANCOUVER METRO AREA
MAP
AREA NAME
# OF
SPRING 08
DATA
ALL
4.49
1.13
4.70
1.09
1293
2320
PROP
REPORT CHANGE
STUDIO
1 BED
1 BATH
2 BED
1 BATH
2 BED
2 BATH
2 BED
TWNHS
3 BED
1 BATH
3 BED
2 BATH
2.36
1.56
621
127
1.97
1.15
727
458
5.26
1.09
900
228
6.82
1.00
1005
220
40.91
1.03
1417
22
4.17
0.76
718
24
4.21
0.86
1297
214
$110
7.8%
$105
7.6%
$100
7.4%
AV E R A G E P R I C E P E R S F
2
NORTHWEST PORTLAND
HILLSBORO |
NORTH OF HWY 26
27
12
3
ALOHA
27
4
5
BEAVERTON
DOWNTOWN PORTLAND
38
16
6.22
0.83
5.68
0.84
1848
1831
4.05
0.82
3.84
0.85
2590
3620
2.64
0.79
2.86
0.79
2388
3080
3.15
1.27
2.99
1.28
1493
1972
-4.47%
+0.04
+9.51%
8.00
4.74
3.90
8.52
12.30
4.17
9.34
-0.01
0.94
457
25
0.92
616
633
0.81
703
462
0.84
881
352
0.76
749
122
0.76
847
72
0.79
968
182
+5.47%
—
4.47
2.96
3.88
—
7.50
5.63
-0.03
—
—
—
0.89
618
783
0.79
674
709
0.78
778
774
—
—
—
0.81
783
40
0.83
891
284
1.30
1.05
493
77
3.85
0.86
589
728
1.88
0.76
676
1115
3.02
0.75
769
199
2.44
0.70
815
41
2.25
0.77
735
89
2.88
0.72
880
139
-7.69%
0.00
+5.35%
1.12
3.67
5.39
1.39
11.11
0.00
0.00
-0.01
1.62
727
267
1.23
766
818
1.20
1026
167
1.40
1732
216
1.32
1488
18
1.15
1348
6
0.56
1130
1
7.2%
7.0%
$90
6.8%
$85
6.6%
$80
6.4%
$75
6.2%
$70
6.0%
$65
7
SW PORTLAND
TIGARD | TUALATIN |
25
34
SHERWOOD
3.82
3.38
0.84
0.87
1152
1333
4.17
3.99
0.83
0.82
2061
2655
4.89
5.06
0.84
0.88
8
LAKE OSWEGO |
6
WEST LINN
+13.02%
-0.03
+4.51%
+0.01
2003
YEAR
WILSONVILLE | CANBY
10
266
158
2.25
1.91
0.84
979
0.80
2.98
0.91
4.87
0.78
4.69
0.79
5.71
0.83
0.00
0.94
2.74
0.73
513
587
676
749
761
965
899
30
369
349
213
35
10
146
1.41
1.29
2.15
0.90
6.09
0.79
3.64
0.83
3.57
0.80
8.00
0.78
6.43
0.80
12
MILWAUKIE
CLACKAMAS
9
21
6
2.45
0.78
1.87
0.83
489
803
3.29
0.79
1.95
0.78
1701
1334
2.62
0.77
1.46
0.83
343
1918
2.18
0.92
1.91
0.91
1648
1306
3.95
0.79
4.11
0.80
1317
1632
3.66
0.79
3.47
0.77
1285
2592
13
14
INNER & CENTRAL
SE (PORTLAND)
OUTER SE (PORTLAND)
58
35
15
TROUTDALE | FAIRVIEW |
WOOD VILLAGE |
GRESHAM
24
4
2007
1/01—9/10/2008
225
228
258
69
$544,676,119
$606,594,805
$639,238,028
$853,605,202
$1,118,980,844
$385,187,767
9,044,710
9,185,625
9,926,050
11,295,396
10,957,763
3,513,222
TOTAL UNITS
9,844
9,555
9,172
11,825
11,951
3,774
TOTAL ACRES
461.55
463.43
411.72
511.84
829.48
187.60
$2,221,959
$2,227,310
$3,793,801
$3,990,542
$4,337,135
$5,582,432
TOTAL $ VOLUME
TOTAL SQUARE FEET
612
687
781
782
788
912
AVERAGE SALE PRICE
71
652
575
439
84
100
140
AVERAGE # OF SF
33,131
32,006
44,116
49,541
42,472
50,916
-3.36%
0.00
3.70
8.41
0.00
0.00
6.25
50.00
AVERAGE PRICE PER SF
$67.07
$69.59
$86.00
$80.55
$102.12
$109.64
-0.04
1.67
1.02
0.83
0.77
0.61
0.73
0.88
500
606
656
783
1000
688
1200
+17.80%
+0.04
1045
2006
287
16
54
107
70
1
16
2
0.00
1.26
1.75
0.84
3.11
0.81
1.69
0.81
—
—
0.00
0.94
2.25
0.91
480
634
748
835
—
850
1088
13
285
354
236
—
2
89
$65.30
$65.91
$73.50
$77.63
$81.44
$87.80
AVERAGE PRICE PER UNIT
MEDIAN PRICE PER SF
$55,251
$61,075
$69,549
$71,604
$84,613
$96,262
MEDIAN PRICE PER UNIT
$53,000
$54,839
$59,911
$66,265
$69,917
$75,000
38
35
45
54
50
58
AVERAGE # OF UNITS
AVERAGE # OF ACRES
+31.02%
-0.05
—
—
—
—
5.49
0.85
642
91
1.50
0.74
668
133
1.00
0.75
775
200
11.11
0.70
630
9
12.50
0.81
800
8
2.08
0.82
1025
48
0.00
1.14
500
34
3.03
0.90
572
595
4.16
0.78
649
794
1.44
0.76
776
139
0.00
0.69
800
59
4.35
0.72
795
23
3.51
0.67
844
57
+79.45%
0.00
1.30
0.62
5.66
—
16.67
11.11
-0.06
1.20
548
18
0.95
689
77
0.77
676
162
0.75
799
53
—
—
—
0.71
780
6
0.72
853
27
0.40
1.22
567
252
2.69
1.00
607
819
1.04
0.84
700
386
5.56
0.81
805
90
1.47
0.70
702
68
14.29
0.83
829
21
0.00
0.78
870
12
-3.89%
0.00
3.16
-0.01
0.99
515
68
0.85
560
348
6.93
0.76
626
433
2.11
0.74
681
332
1.64
0.75
659
61
7.50
0.76
762
40
0.00
0.81
829
35
+5.48%
—
5.65
3.29
3.54
+0.02
—
—
—
0.93
608
0.78
653
0.76
724
3.23
0.68
678
0.00
0.90
675
0.00
0.71
866
301
456
396
31
5
96
+68.72%
+0.01
+14.14%
+0.01
AVERAGE GRM
1.69
1.61
1.83
2.24
3.22
2.72
7.6%
7.2%
6.6%
6.4%
6.1%
5.9%
7.7
8.2
8.7
9.0
9.7
8.8
CoStar: Search criteria—Research Status: Published; Market: Portland; PropType: Multi Family; Sale Date: 1/2003—6/2008; unit: 5 and over.
GRM
AV E R A G E P R I C E P E R U N I T
price per unit in thousands
11
OREGON CITY |
GLADSTONE
2005
273
AVERAGE CAP RATE
10
2004
2003 2004 2005 2006 2007 2008
585
9
0.00
1.18
5.8%
2003 2004 2005 2006 2007 2008
TOTAL SALES
6
C A P R AT E
$95
price per SF
1
$100
9.8
$95
9.6
9.4
$90
9.2
$85
9.0
$80
8.8
$75
8.6
8.4
$70
8.2
$65
8.0
$60
$55
7.8
7.6
2003 2004 2005 2006 2007 2008
13
2003 2004 2005 2006 2007 2008
S TA B L E M A R K E T C O N T I N U E S
continued from page 1
marketplace. He states that apartment sales are slow and that
financing is difficult, in spite of increasing rents and low
vacancy rates.
takeover has yet to be determined. In his article, Adam Cassie,
with Cohen Financial, discusses the credit crunch and its
impact on investors. He notes that “Offered loan terms shift
from loan application through closing and good solid rate locks
are hard to come by”.
This issue contains results from 485 properties, representing
29,900 units. All of the articles have been reprinted without
editing the content, in order to present unbiased opinions. We’d
like to thank all of the management companies and property
owners who have submitted information. Their participation is
critical in insuring the accuracy of our data and the continued
success of this report.
This issue features an excellent contribution from Carmen
Villarma, with The Management Group Inc. She presents an
insiders take on the Vancouver/Clark County apartment market
from both a management and brokerage perspective. She
explains that “The solid performance of apartment communities
in the Vancouver and greater Clark County market has
continued to bring more investors to the north side of the river”.
Steve Williams, one of Oregon’s regional economists, examines
the “drastically slower local housing market” in Deschutes
County and its impact on employment in that area. We also
have a contribution from Amy Vandervliet from the Oregon
Employment Dept. Amy predicts that Portland’s economy
“won’t see appreciable growth until the latter part of 2009”.
SURVEY SAYS!
In an article submitted by Brian Miles, from CMI Commercial
Real Estate, Brian provides his usual unabashed advice to
landlords and analysis of the Southern Willamette Valley
IS YOUR BUILDING SMOKE FREE?
MAP AREA
MAP AREA
YES
NW Portland
DO YOU ACCEPT SEC 8 VOUCHERS?
58%
YES
NW Portland
47%
13%
63%
Aloha
24%
Beaverton
16%
Beaverton
27%
Downtown Portland
12%
Downtown Portland
SW Portland
13%
SW Portland
Aloha
9%
4%
Wilsonville/Canby
0%
Wilsonville/Canby
0%
Clackamas
Outer SE (Portland)
50%
20%
Outer NE (Portland)
17%
Salem/Vicinity
Eugene/Springfield
Bend/Redmond
Clackamas
25%
30%
43%
33%
Outer NE (Portland)
East Vancouver
56%
64%
24%
60%
58%
27%
West Vancouver
8%
25%
East Vancouver
0%
100%
43%
Salem/Vicinity
6%
28%
Eugene/Springfield
Bend/Redmond
40%
6
Adam Cassie—Cohen Financial
The summer hasn’t been kind to the
commercial/multifamily capital markets.
Commercial banks are still in the midst of discovering the value
of what they have on their balance sheets that is collateral for
existing loans. This “price discovery” is also redefining what is
appropriate leverage and pricing going forward on prospective
loans. This daily flow of new information is causing daily
disruptions in what the lender thinks it can or will offer. Offered
loan terms shift from loan application through closing and good
solid rate locks are hard to come by. A Survey conducted by the
Federal Reserve Board polled senior lending officers across
hundreds of banks. The majority of them said that credit
is tighter now than during the real estate credit crunch of
1989-1992, and tighter than 2001, when the market was
weaker with tremendous excess supply and higher vacancies.
Buyers and sellers are frustrated because the bid-ask gap is too
wide. Lenders are defining value, not buyers and sellers.
Overall, multifamily debt originations are down 42% from Q2
2007 across the country according to the Mortgage Bankers
Association. Combined commercial and multifamily loan
originations are down 63%. The lower number for multifamily
is due in part to the availability of debt from Fannie and Freddie
amidst our credit crisis as well as the disappearance of a liquid
CMBS market.
Since the beginning of the year, I have taken dozens of calls
from investment sales brokers who want to get connected with
the special assets & loan work out departments of investment
banks, commercial banks, and other lenders. They hear about
all the bad news in the credit markets and want to get the
listings on properties that are being taken back by the banks.
This is a great idea, but there are some things to consider:
If there is an over-abundance of capital right now in the fall of
2008, it’s in the “opportunity capital” space. Many call them
vulture funds, hard money lenders, mezz lenders, or preferred
equity providers. These funds are flush with cash, looking for
unleveraged returns in the mid to high teens, and are looking for
distressed deals. The trouble is that there isn’t enough distress
out there. At least not on the property types these funds are
looking to purchase or lend on. They want performing; income
producing properties in great locations, but all that is available
right now for a deep discount is land and condos. The “bid-ask”
gap that exists on performing assets will continue well into 2009.
In summary, the credit crunch is still unfolding. Transactions are
a fraction of what they were last year and Fannie and Freddie are
good financing options for the moment. The disappearance of the
leveraged buyer has helped make the bidding process more
rational and will give some negotiating strength to the
sophisticated, cash buyers with solid reputations for execution.
Adam Cassie, [email protected] is Vice President of Capital
Markets for the Portland office of Cohen Financial. Cohen Financial is
a real estate investment bank that sources debt and equity for
commercial real estate developers and investors.
Fannie and Freddie’s cost of capital continues to rise as their
stock price declines. Earlier in August, Freddie Mac had to pay
an outrageous premium on a $3 billion issuance of 5-year debt
to fund its operations. Freddie paid a rate of 113 bps over what
the fed would pay, but earlier in Q1 it was only 60 bps over.
This will continue to increase the spread premium they charge
over the corresponding treasuries to provide debt to multifamily
borrowers.
39%
Outer SE (Portland)
4%
West Vancouver
14%
38%
67%
Milwaukie
18%
12%
29%
Milwaukie
10%
0%
DISTRESSED ASSETS
CAPITAL MARKETS
UPDATE FALL 2008
3%
83%
But for now, the agencies are still in business and have risen to
the top as the lender of choice for apartment refinances and
acquisitions, and provide a capital source that isn’t available to
other commercial borrowers. Life Companies and Commercial
Banks are originating multifamily loans selectively but are
down nearly 30% from their records set in 2006 and 2007.
Back then, the agencies were not as competitive and were
marginalized by the investment bank’s CMBS offerings. Today,
CMBS is down 98%. Fannie and Freddie have helped to backfill
the void left by Wall Street CMBS and the others and have
increased originations by 66%, which has helped increase their
market share to 31% of all multifamily mortgages outstanding.
But the stabilization of these two multifamily mortgage giants
has not come to a conclusion and while they are the option
today, they may not be tomorrow.
11
constraints versus lack of investor interest. The average unit
price in 2008 of $71,977 is also lower than in 2007 ($77,541)
due to the fact that the average year built was 1989, and at
least three of the sales had deferred maintenance. The now
non-existent condominium conversion market also inflated
some of the individual sale prices in 2007. According to several
local apartment brokers and appraisers in the area, the
tightening financing market is also pushing capitalization rates
for sales negotiated in 2008 up approximately one-quarter of
one percent.
CLARK COUNTY
APARTMENT REPORT
Carmen Villarma, CPM—Principle, Battle Ground Village
President, The Management Group
For those of you who live and breathe the apartment market,
you already know that the days of Vancouver/Clark County
being a step-sister to the greater Portland area have been rapidly
diminishing over the last few years. Other than the obvious
boundary, the Columbia River, the lines between the two
markets have continued to fade as rents, sales, and absorption
rates in Clark County are now keeping pace with most of the
communities located on the south side of the river.
Consequently, Clark County also continues to capture investor
dollars and speculators looking for new opportunities to build
additional units.
MULTI-FAMILY APARTMENT SALES OVER $1 MILLION : CLARK COUNTY JAN–JULY 2008 (continued from page 8)
SALE PRICE
SALE DATE
NAME
ADDRESS
CITY
$2,030,000
07/15/2008
$3,500,000
06/12/2008
$2,910,000
YR BLT
# UNITS
$/UNIT
RIVER VIEW
225 NE SUMNER ST
CAMAS
1999
28
$72,500
CORPORATE WOODS
4821 NE 110TH AVE
VANCOUVER
2003
110
$74,468
05/01/2008
CHERRYWOOD PARK
3205 NE 53RD ST
VANCOUVER
1972
48
$60,625
$6,673,900
07/08/2008
ROLLING HILLS
7301 NE 13TH AVE
VANCOUVER
1972
111
$60,125
$16,900,000
07/01/2008
POLO CLUB
4820 NE HAZEL DELL AVE
VANCOUVER
1996
200
$84,500
$26,600,000
01/03/2008
MEADOWWOOD
6811 NE 121ST AVE
VANCOUVER
1993
334
$79,641
PROPOSED MULTI-FAMILY
DEVELOPMENTS OVER $1 MILLION
SUMMARY: 2008 APARTMENT SALES OVER $1MILLION CLARK COUNTY
Proposed multi-family development in Clark County includes
eight properties totaling roughly 1,142 new units. Of the
proposed inventory, 454 units (40%) are proposed either in or
near the downtown core, 336 units (29%) are planned in the
Orchards/Brush Prairie area, 272 units (24%) are proposed for
East Vancouver near the 162nd Avenue and 192nd Avenue
corridors, and the remaining 80 units are planned for Battle
Ground. Of the 8 properties planned, seven are market rate
properties. The ability for these properties to actually make it
out of the ground will depend primarily on financing,
construction costs, and the ability for the current economics to
support increasing rents.
Of course Clark County is not immune to the greater economic
problems that are impacting the region and the nation as a
whole, such as bankruptcy, foreclosures, and unemployment.
However, the biggest question from an ownership standpoint is
whether or not these economic factors are currently, or will in
the near future, have a negative impact on the apartment
market. To-date, most market experts agree that the economic
climate has not yet negatively impacted the market from a
rental standpoint except for the fact that rents are not increasing
at the rate many projected at the onset of the housing decline.
Local property management companies, appraisers, and market
publications are in agreement that rents have increased
approximately 2 to 4% in the Vancouver market during the first
half of 2008, and occupancies are holding strong at the 94-96
percent range. Many of the properties experiencing the
strongest rent increases and lowest vacancies are located in the
close-in Vancouver market, while those properties experiencing
the lowest rent increases and highest vacancies are located
generally in the outlying areas of Ridgefield, Battle Ground,
Camas, and Washougal. The same is also true of concessions,
with few “close-in” properties offering any significant
concessions, and concessions in the outlying areas ranging
from one week to three weeks of free rent.
How will the current economic conditions impact the
remainder of the year? Great question, and one that truly only
time will tell. However, based on what we know today, the
jobless rate continues to climb in Clark County and home sales
continue to soften. For example, Clark County's jobless rate
reached a six-year high of 8.2 percent in August of 2008, while
the jobless rate in Washington State and Oregon were both at
6%. During the first seven months of 2008, the total single
family home sales volume was off 40%, and the average price
of new home in Clark County also decreased 17% to $323,396
from the same time period in 2007. The silver lining is that the
average price of an existing home remains unchanged at
$302,947. While the housing issues continue to create barriersto-entry for potential homebuyers, and also force many former
homeowners into rentals, we cannot overlook the impact of the
economy.
The solid performance of apartment communities in the
Vancouver and greater Clark County market has continued to
bring more investors to the north side of the river. A total of six
arms-length apartment sales have closed during the first seven
months of 2008, and they are summarized on the following
chart at the top of page 9.
For the remainder of 2008, I see the challenge is in finding
ways to increase rents while the tenant pool becomes
increasingly impacted by joblessness, bankruptcies, and poor
credit. At the same time, finding ways to control expenses is, as
always, at the top of the list so that increases made in effective
gross income are not immediately eroded by increasing
expenses.
The number of sales that have taken place in Clark County
during the first seven months of 2008 is down from the same
time period in 2007 when 15 properties totaling 1,063 units
closed and equated to a total sales volume of $85,055,000. The
smaller number of properties and units selling in the Clark
County market in 2008 vs. 2007 is due primarily to financing
Carmen Villarma, CPM, is President of The Management Group, Inc.
(TMG), a Washington based real estate services company. TMG is
headquartered in Vancouver with satellite offices in Portland & Albany,
Oregon & Kennewick, WA. TMG is a multi service company managing
over 14,000 residential units comprised of apartments, community
associations and single family homes.
8
TOTAL NUMBER OF TRANSACTIONS: ................................................6
TOTAL NUMBER OF UNITS: ..........................................................768
TOTAL SALES VOLUME: ..................................................$58,613,900
MEDIAN YEAR BUILT: ................................................................1995
AVERAGE YEAR BUILT:
..............................................................1989
AVERAGE PRICE PER UNIT: ....................................................$71,977
MEDIAN PRICE PER UNIT: ......................................................$73,484
EMPLOYMENT
Amy Vander Vliet—Oregon Employment Department
The good news—or perhaps the less gloomy news—is that
Portland is faring better than the nation and outperforming
about half of the country’s largest metro areas. We benefit from
a strong export market, where a weak dollar and rapid growth
in Asia contributed to a 24 percent annual increase in Oregon
exports in the first quarter of 2008. Additionally, our housing
market is still holding up better than many other major metro
areas (as measured by price appreciation and foreclosure rates).
HOLDING UP SURPRISINGLY WELL?
Portland’s economy has slowed dramatically, weakened by high
energy prices and a national mortgage meltdown that has now
evolved into a credit crisis. Annual job growth averaged just 0.4
percent this past summer, compared to 1.5 percent at the start
of the year and over 2 percent in 2007. Meanwhile, the metro
area’s unemployment rate has climbed to 5.5 percent; the
highest level in almost three years although still well below
what we experienced during the 2001-2003 recession, during
which rates neared nine percent.
On the other hand, we lack the economic drivers that are
currently powering those metro areas which are handily
outperforming us. Texas’s four largest metros are adding jobs
two to three times faster than Portland due to a booming energy
sector fueled by high gas and oil prices, and a relatively low
cost of living. Oklahoma City is also riding the energy wave, as
well as enjoying a strong agricultural sector fed by high wheat,
corn, and beef prices. Closer to home, Seattle is up two percent
over the year, owing to vibrant software and computer systems
design sectors and strength in aerospace. From Microsoft and
Boeing to numerous smaller start-ups, our neighbor to the north
is bucking the national trend.
A major issue still affecting the Portland metro area is the
housing situation. With significant weakness in residential
permits, prices, and sales, construction employment has
declined five percent over the year; a loss of 3,500 jobs.
Residential construction employment fell below year-ago levels
in February and is now down 10 percent over the year and
falling. Commercial construction held on through the summer
but is teetering on the brink. We’ll likely see declines in the
coming months as those cranes dotting the skyline of Portland
disappear and future projects are put on hold due to an
uncertain economy and lack of financing.
Oregon’s Office of Economic Analysis’s latest forecast
anticipates that the state economy will bottom out later this
year, but we won’t see appreciable growth until the latter part
of 2009. Portland will likely follow suit.
Weakness in construction continues to cause ripples, or waves,
in other sectors of the economy, notably finance. The region’s
banks, mortgage companies, and other lending institutions have
cut 1,200 jobs since the summer of 2007. Employment in retail,
hit by both a decline in home equity and high energy costs, has
fallen below year-ago levels for the first time in five years.
Amy Vander Vliet is an Economist for the Oregon Employment
Department, covering the Portland metropolitan area. She produces and
analyzes employment trends, including the unemployment rate and
monthly job growth in the region’s major industries.
9

2008 Fall Apartment Report

Transcription

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