San Francisco Pricing Out Millennials

San Francisco Pricing Out Millennials

October 2015
The B300BayAreaULIay Area’s high housing costs may soon push Millennials out of the area, according to a recent Urban Land Institute study. 
Consider that:

  • –74 percent of Millennials living in the Bay Area are considering moving during the next five years, but housing affordability makes it likely they will move away from the area.
  • –Just 24 percent of San Francisco Millennials are confident they will be able to purchase or rent their desired home in the Bay Area in the next five years.

What do Millennials Want? 

Millennials –born between 1980 aSan Fran streetsnd 1995–are attracted to San Francisco’s tech jobs and opportunities for outdoor activities. But the places they can afford to live lack easy access to their desired amenities, such as: bike and pedestrian lanes; public transit; parks and places to buy fresh, healthy food.

Who are they? Millennials:

  • Are the most likely age group to rent
  • Have the highest number of Latinos and Asians
  • The most likely to have low incomes and live in apartments in urban areas
  • Feel strongly about the quality of the environment

The Solution?
Read more

Micro-Housing Brings Little Units, Big Profits

Micro-Housing Brings Little Units, Big Profits

Multi-Family Update

This micro-housing concept as designed by Studio G Architects

This micro-housing concept as designed by Studio G Architects

Micro-housing is hot, particularly in markets with a high barrier to entry for renters on a small budget, says National Real Estate Investor in “7 Things You Need to Know About Micro-Housing Investment.” Here’s what the experts see as the latest trends in multifamily development:

What is micro-housing and who wants it?

Studio micro-housing units are usually between 250 and 400 square feet. One bedrooms vary more by market, but are generally defined as units up to 600 square feet.

First-time renters who haven’t yet acquired a lot of money (or stuff) are big renters of these units. Seniors looking for a pied-a-terre in an urban location or vacation spot are also driving micro-unit rentals.

  • Why invest in micro-housing?
    • Renters are willing to pay a premium, sometimes up to 20% more per square foot, for well-located micro-units near where they want to work or play.
    • There is consistent demand for multi-family and rental housing, and younger renters will demand micro-units out of necessity if they are priced out of larger units.
    • But there aren’t a lot of comps yet, so micro-housing lending can be challenging
      Shown is the Avenir in Philadelphia

      Shown is the Avenir in Philadelphia

What’s the future of micro-housing?

In several cities, micro-housing buildings are keeping waiting lists due to their popularity.

High-priced metro areas with tight housing stock, like Los Angeles, New York City, San Francisco, Seattle, San Jose and Washington, D.C will see continued interest in micro-units.

Multifamily Debt Rises; Demand Outpaces Supply

Multifamily Debt Rises; Demand Outpaces Supply

9.25.2015

jeffjack (1)

Both supply and demand are up in the Chicago multifamily markets. Midwest Real Estate News reports that 5,000 new units will come on the market in the city in 2016, but vacancies will remain tight, falling to 3.71%. Will demand slow? Click
here
for more. (Pictured: Jeff Jack Apartments in Chicago)

Globe Street reports that outstanding multifamily commercial mortgage debt rose 1.4% during Q2. That means borrowers owe about $1.2 trillion on apartment assets across the U.S., and rising property values are supporting this increased debt. Who’s holding the loans? Click here for more.

New construction starts dropped 11% in August, according to this MultifamilyBiz story. Declines were seen in each of the three main sectors – nonresidential building, housing, and nonbuilding. According to Dodge Data & Analytics, the activity dropped to a seasonally adjusted annual rate of $554.5 billion. Read more

The Scoop on Interest Rates — Now or Later

The Scoop on Interest Rates — Now or Later

Rates to stay the same, but it’s just a matter of time. What does it mean for #CRE?

nyc skyline

GlobeSt tell us what it means to investment, capital flow and debt maturing.

Marcus & Millichap provides an in depth look and says it will likely spark a new round of questions about the strength of the US economy. 

Reuters says an increase won’t be enough to cool the hot NY CRE market.

Marketwatch.com looks broadly at whether interest rate changes can forestall asset bubbles. Did moving too slow cause previous financial turmoil?

Wealth Management looks at how it will affect investment, particularly REITS.

Logo-WallStreetJournal

And, in the UK, the Wall Street Journal says an increase by the Bank of England would mean an end to the property boom there.

Multifamily Update 9.18.2015

Multifamily Update 9.18.2015

Investment, Construction on the Rise

National

WBJlogoMulti-family investment reaches all-time high in the U.S. The Worcester Business Journal reports that investment in U.S. multifamily properties reached $127 million by mid-year 2015. This accounts for 27% of overall real estate investment in the U.S.
Click here
to see which cities are leading the pack.

Los Angeles/So. Cal

Eight and Grand complex in downtown LAL.A. is hot for developers –and they’re going vertical. Strong demand and limited land is causing a flurry of activity—and developers are moving skyward to make projects work financially. Among the 67 residential or mixed-use properties totaling 22,435 units under construction are:

  • The tallest residential project – a 50-story project at 820 S. Olive Street by Onni Group of Vancouver
  • The $1 billion mixed-use project in the South Park district—Metropolis, which has a 54-story condo tower, plus 38- and 40-story towers.

See this National Real Estate Investor story for more. (Shown is Eighth and Grand in downtown LA by Carmel Partners) Read more

Student Housing Update — Amenities Still King?

Student Housing Update — Amenities Still King?

9.13.2015

Amenities: More Over-the-Top Than Ever

Attempts to one-up other management companies to gain new student tenants have reached new heights, says the Wall Street Journal. Landlords are now partnering with corporations like Uber, Best Buy and bike-sharing service Zagster to offer promotions and discounts to students living in their buildings.

Good or bad approach? Some management companies love the way this helps them compete at a low cost, while others are skeptical of interfering with students’ consumer relationships. Where is this all going? Find out
here
.

 

NREI amenities

Photo: Al Payne of A.F. Payne Photographic Inc.

Should We Scale Back?

National Real Estate Investor interviewed several student housing owners to analyze trends. While most say student housing is gaining value and becoming a more mainstream asset, Campus Apartments CEO David J. Adelman notes that high-level amenities often increase construction costs and only appeal to high-income students. Find out more here. Read more

Multi-Family Market Update – Sept. 9, 2015

Multi-Family Market Update – Sept. 9, 2015

Yes, the multi-family market is still hot. The quantity of apartment rents continue to increase despite the increased cost of rent and its total makeup of a renters’ income. Location still seems to be the biggest pull for young professionals and renters, at large. In addition to big hot spots like New York City, many other cities are investing in their multi-family properties.

J.C. Hart Co. secured $38.5 million in financing for Indianapolis's Hamilton apartments (featured image) and BayShore apartments. Courtesy of GlobeSt.com.

J.C. Hart Co. secured $38.5 million in financing for Indianapolis’s Hamilton apartments (featured image) and BayShore apartments. Courtesy of GlobeSt.com.

Indianapolis

Indianapolis’s recent rise as one of the top distribution and logistics hubs in the nation is also boosting the city’s multi-family sector. The strong economy and steady rent growth is encouraging multi-family real estate owners to solidify their financial standing and ensure their properties have the proper amenities to lure renters.

 

Los Angeles 

Many domestic and foreign investors begin construction for new residential developments to meet the record high demand for housing in Los Angeles. A total of 67 housing projects are planned or underway and many have over 40 stories. Among the developers include the Chinese, Australians, and Canadians.

Student Housing Update

Student Housing Update

8.30.2015

Alternative Solutions for Small Campuses, New Purchases, and More

As students arrived on various campuses across the country this fall, investors started making plans to build new student housing apartments for next year. Here’s a look:

National

AP dorm room
The AP reported
that small campuses that are admitting more students this year are thinking of new ways to house additional students who can’t find a place to live. Some are asking community members to rent out their spare bedrooms or basements while others put their students up in hotels or rent additional housing from other nearby campuses. The good news for developers and investors? Small campuses may be ready for new developments—as long as they’re not too large.

Investment/Development Update

Grand Rapids, Michigan

Grand Rapids

The Loft is a new student housing oriented project.

A group of private investors from the East Coast acquired The Lofts at 5 Lyon, a 104-year-old former office building that was recently converted into 65 unites of housing rented primarily to students at Kendall College of Art and Design. MiBiz reports that the building was purchased for $12.5 million, or $192,000 per unit, a significant increase from the $700,000 that 5 Lyon Street LLC purchase the building for 12 years ago.  Read more

Student Housing Update: Where’s the Activity?

Student Housing Update: Where’s the Activity?

8.19.2015

For developers and property managers, the phrase “back to school” means a deadline to put the finishing touches on a new property and an opportunity to start the school year with fully leased properties.  Here’s what we’re seeing as students head back to campus this fall.

National

campus-housingStudent housing is beginning to be seen as a mainstream property type and a solid investment for REITs, but not enough properties are stabilized and on the market from the latest wave of development, according to National Real Estate Investor.  REITs are raising capital to invest in student housing, and they should begin acquiring properties over the next few years, says JLL Capital Markets. Some owners, like American Campus Communities and Education Realty Trust, are continuing to develop and plan to acquire new buildings later.

Chicago

Logo-CrainsHarrison Street Real Estate Capital recently acquired the 771- bed Dwight Lofts dormitory in the South Loop for $105 million, according to Crain’s. The building at 642 S. Clark St. is entirely leased to Columbia College Chicago through 2026. This is the third purchase of a major student housing building in the city this year. Student housing in Chicago remains a renters market, even though rents in the city’s downtown are rising.

St. Louis

Landmark Properties and Sangita are contributing to the redevelopment of downtown St. Louis with the opening of their new high-end student apartment building, The Standard. The 465-room tower is more than 99% leased, with amenities like granite countertops, stainless steel appliances, a fitness center, a club room and a coffee bar. The building is geared towards St. Louis University students, who will pay $800 to $1100 per room to live in units with one to five bedrooms.

Glassboro, New Jersey

20150808_inq_jrowan08-bRowan University students will have another option for housing this fall as the new 316,000 SF mixed-use building at 220 Rowan Blvd opened its doors recently, according to philly.com. The building, developed by Nexus Properties, contains 60 market-rate apartments and will also house 450 students.  The $74 million structure includes 20,000 SF of retail and 27,000 SF of medical space.

Auburn, Alabama

Students at Auburn University may have a new place to live soon, as CA Student Living announced plans to develop a 126- unit, 456-bed mixed-use building called the Jackson near campus. Student Housing Business reports that the development  will replace the Center Court Apartments, which will be demolished, and will include a pool, bike parking and parking garage.

Millennials Are Shaping Multifamily, Office

Millennials Are Shaping Multifamily, Office

Atlanta

Strong multifamily growth supported by urbanization and continued job growth. Atlanta is reflecting the national trend of city migration. Millennials desire long-term renting in the city with access to trendy amenities and nearby city entertainment, and Baby-boomers are following suit. According to a CBRE report, the apartment vacancy rate is 4.8% with a home-ownership rate of 63.4%–the lowest since 1967.  Popular Atlanta submarkets for Millennials and other renters include Buckhead, Midtown, Old Fourth Ward, and Inman Park. Find out more here

Millennials are a target for this Buckhead development in Atlanta

Find out more on this Buckhead multifamily development. 

Orange County

Next-generation office developments are the trend in city centers like Orange County.

Irvine Co. is developing six next-generation office structures. Nicknamed “next-gen” office buildings, these developments intend to balance productivity and efficiency along with modern collaborative features in the workplace—features including cafes, wellness-centers, and other indoor and outdoor activities. The developers say the campuses they are building are not totally unlike college campuses. The “amenities race” is not limited to multifamily. Check it out in this office development story.

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