Multifamily NW Spring 2015 Apartment Report Breakfast April 22, 2015
MULTI-FAMILY NORTHWEST SPRING REPORT DEVELOPMENT UPDATE April 22, 2015
Multifamily NW
Spring 2015 Apartment Report Breakfast
April 22, 2015
State of the MF Development Market
Development Trends
Where is the market headed?
State of the Portland MF Development Market
2015. Great time to be a
developer
2009 - 2011. Terrible time to be a developer
THEN
NOW
Portland Metro is among top 10 metros for projected high-wage job
growth through 2017 (Careerbuilder)
Portland Occupancy Rate - 96.43% - March 2015 (Axiometrics)
Oregon Ranked #1 2014 Moving Destination (United Vanlines)
32,000 private sector jobs added year-over-year – 3.7% increase
(OLMIS, June 2014)
3rd for millennial net in-migration out of top 51 MSA’s from 2009-2012
(Brookings Institute)
Portland Metro – ranked #6 US Rent Growth at 6.7% - March 2015
(MPF)
The Portland market is on fire
State of the Portland MF Development Market
Source:
State of the Portland MF Development
Market
Strong employment growth is fueling the office
market
creating strong apartment rental demand
Development Trends – “Urban Village”
development
Portland’s great neighborhoods and popular transit oriented streets
promote strong village like living and are well suited to unique multi-family
development
and place making
Established neighborhoods with good access to transit, schools and parks
Within walking distance of grocery stores, restaurants and other
neighborhood retail
Commute to CBD/major employment centers (> 10 min by car, 20 by bike
and bus)
Infill sites with barriers to entry and new supply
Development Trends – Ideal “urban village location”
Development Trends – Build “handcrafted” and unique communities
Portlanders value and will pay for authentic not
“contrived” experiences, products and apartment
communities
Development Trends – Urban amenities
High Speed Internet
LEED Certification
IOTAS – (Smart Home Technology)
All management functions online
Fitness on demand (group fitness)
Mechanical parking
Development Trends – Technology
and building systems
Development Trends - Marketing and social media
Strong design matters. Develop buildings with strong design that integrate into the
surrounding neighborhood and add to the economic vitality and street life
Technology. High speed internet for streaming video content (Apple TV, Netflix etc.),
online
access for applications, rent payments, service requests and use of social media for
marketing and
community building with residents
Community Outreach. Build partnerships with area businesses and integrate them into
the brand of your community
Sustainability. Lifestyle values make a difference on where residents want to
live (bike friendly, sustainable building features, energy efficiency, access to transit,
recycling,
community gardens etc.)
Parking. Still a must and will be very important in the next down cycle. Mechanical
parking is becoming more popular
Lifestyle Amenities. Amenities should reflect resident lifestyle, interests and values
(community rooms, outdoor spaces, bike hubs, pet washing rooms)
Concierge Service. Management that creates community through resident interaction
and events
Add value. Residents are more discerning and will pay more in rent if there
are good amenities and the property has real community
Development Trends
Development Trends – Urban Case
Study
Boutique hotel quality lobby and leasing office
Modern “Modern lodge” themed architecture
Condominium quality finishes
Rooftop “skyroom” Underground garage for cars,
motorcycles and Bike Hub w/Dero bike
racks, commuter lockers, bike wash and
repair station
135 Apartment Homes
90% occupancy in 6 months
20 units/month absorption
Average Unit Size – 594 SF
Proforma rent (2014) -
$2.30/SF
Actual (2015) - $2.63/SF
No concessions
101 Apartment Homes
90% occupancy in 7 months
13 units/month absorption
Average Unit Size – 840 SF
Proforma rent (2013) -
$1.27/SF
Actual (2015) - $1.52/SF
No concessions
101 urban apartment homes in 2 buildings Historic Old Town Sherwood
Development Trends - Urban apartments work in suburban town centers
Development Trends – Urban Ultra Luxury High Rise
290 Apartment homes
220 underground parking stalls
9 stories with 2 levels
underground
(Type I construction)
1,400 SF Fitness Center with
separate yoga space
Grand lobby lounge
Hotel conceirge style leasing
Business Center
Roof top terrace with grills 2 fire
tables, heated outdoor living
room with louvered roof, inifinity
spa, 2 roof top lounges
Media room, wine storage
room/event space
Top floor pet relief area with
indoor viewing lounge
July 2017 Delivery Modera
Pearl
113 Apartment Homes
28,000 SF New Seasons
Market
20,000 SF urban retail
August 2015 delivery
Development Trends – Urban grocery anchored mixed use
Land Cost -
Construction Cost -
Availability of Capital -
Cost of Capital -
Rents –
Absorption –
Occupancy –
New supply -
Development yields -
In Migration –
Job Growth -
Where is the market headed?
Concerns Rent Growth. Can income growth up with rent growth?
Rent vs. Own. Average Rent = $1,163 vs. Average Mortgage Payment of $1,780
Will new supply exceed demand?
- 2,380 apartments completed in 2014
- 2,950 units are forecast to be delivered in 2015
- 5,500 permits projected to be issued in 2015
Lower Yields. Much higher land and construction cost escalations
Duration of the current economic cycle
Where is the market headed?
10 Year Treasury < 2%
10 Year Swiss Bond -% rate
10 Year German and French
Bonds - <.5%
Conclusion Cap rates should stay low given
limited investment alternatives
with yield
Low cost capital will fuel more
development and investment in
sector
Capital is abundant and cheap
Mueller cycle graph indicates Portland is in the “Hyper supply” phase
Where is the market headed?
Real GDP Growth forecast
Where is the market headed?
A few innings left but don’t count on extra innings
TIME TO BE CAREFUL!!
THANK YOU
THANK YOU!
