In our research, we find that strong economic growth and the robust labor market continue to support the strength in the multifamily market. Last year ended much stronger than anticipated with near record absorptions and stronger rent growth compared with the prior few years. The first two quarters of 2019 saw mixed results, with slower growth in the first quarter but preliminary second quarter information indicating the spring leasing season is off to a strong start. Along with the strong fundamentals, lower interest rates continue to drive origination volume higher throughout 2019...
We continue to see an overall shortage in housing as household demand outpaces new supply. The U.S. Census Bureau reports five-plus unit multifamily completions are on pace in 2019 to exceed the previous few years. However, total housing completions over the past three years have averaged 1.1 million housing units each year, while the number of households have increased on average 1.4 million each year. The continued increase in multifamily construction when the overall housing market continues to remain unbalanced is not necessarily an oversupply concern as the economy struggles to build enough housing. ..
The multifamily market is expected to remain healthy for the rest of 2019 and into 2020. We expect demand to remain robust and continue to entice construction of multifamily units. New supply is scheduled to remain elevated for the next few years. As this supply enters the market, we expect vacancy rates to increase throughout the year, but only marginally, up to 5.2%. We anticipate that rent growth will remain healthy at around 4% in 2019.
NAA recently interviewed economist Ryan Severino about what he’s seeing in the apartment market, and he had some interesting things to say about the demographic measurements that apartment owners should keep an eye on. Here’s his reply to the question, “What concerns do you have for the apartment market over the next couple of years?”:
Severino: Certainly, affordability is an issue. This is years down the road, but I wonder what happens when Gen Y is not the prime rental cohort anymore. What happens during that change over? Even though we make the blanket assumption that the propensity to rent isn’t going to change, the shrinking of that generational changeover from Gen Y to Gen Z will mean significantly fewer renters during that period, especially if Gen Y starts to transition a little more seriously out of renting into homeownership.
Because of that, I wonder what happens to some of these new apartment communities that are expensive because the land is expensive and material costs are expensive and labor is expensive. What happens to that stuff when you start to get a pullback as a demographic changeover occurs? That’s a little bit further down the road than just the next couple of years, but it’s something that I’ve been thinking about because of demographics.
According to a brief published by CBRE and referenced in an article in MultiFamily Executive, national turnover rates for multifamily housing are at their lowest level in the past 20 years. From the article:
A recent brief published by CBRE shows the turnover rate for multifamily housing has fallen to 47.5%, which is the lowest level in two decades. CBRE quotes numbers from RealPage that show a drop of 80 basis points. The decline is confirmed by additional evidence culled from six major real estate investment trusts (REITs). AvalonBay, Camden, Equity Residential (EQR), MAA, and UDR all show a lower turnover rate in Q1 2019 as compared with 2018 with an annual average drop of 2% to 42%. Essex showed a 1-point rise to 41%.
The drop represents an overall trend that has been happening since at least 2000, when the rate was clocked at 65%. According to CBRE, “lower turnover rates are generally interpreted as positives for the industry and a sign of favorable market strength at this point in the cycle.” Turnover ticked up a bit in the mid-2000s but then tumbled again during the Great Recession.
The lowest turnover rates were in the Northeast and Midwest, while the rates in the South and West were higher. Also, rates of turnover were lower in Class B and C properties than in Class A properties.
Wood Partners has been successful in marketing some of its communities at Starbucks’ in-store or drive-thru lines. Here’s a little about their program from an article in UNITS magazine:
We partner with Starbucks often and have great success with outreach events at Starbucks locations near our communities. One of our favorite ways to outreach at Starbucks and other local coffee shops is to have a pay-it-forward event, where we purchase coffee drinks for the prospects and distribute information about our community.
It creates feel-good experiences that are memorable for the patrons and at the same time, helps us to get the word out about our new communities. I can only imagine the word-of-mouth exposure that our communities receive when the recipients of a pay it forward coffee drink share the news with friends, family and colleagues.
We had a particularly successful partnership with a Starbucks location in Charlotte, N.C. The local Starbucks named a drink, the vanilla-flavored APV Latte, after our newly opened community, Alta Prosperity Village, and we were able to advertise the drink.
Starbucks provided our team with Starbucks gift cards, and we provided our prospects with a gift card after each tour. We have found Starbucks to be a great partner and that they are willing to work with us in most scenarios. The level and type of partnership vary by location.
Earlier this year PTAA’s Food Drive Committee set a crazy, audacious goal: raise enough food and money for Second Harvest Food Bank to provide 500,000 meals. Why’s that audacious? Because the 2018 goal was 225,000 meals! But, they would not be deterred and when then the drive kicked off on May 1 they were determined to meet that crazy milestone.
Well, we’re happy to report that around noon on July 31, the day that marked the official end of the food drive, we received an anonymous donation that put us over the top and we succeeded in meeting the 500,000 meal goal! Much credit and thanks are due to:
All of the PTAA member communities, management companies and supplier partners who enthusiastically participated in the drive.
The Food Drive Committee, co-chaired by Renee Phillips and Tyler Hunt, who did a great job organizing and recruiting volunteers for our food drive-related events.
All of PTAA’s Volunteers; especially those hardy souls who stood out in the heat to collect food for Fill the Stands With Cans.
The Greensboro Grasshoppers, High Point Rockers and Winston-Salem Dash who partnered with us for Fill the Stands With Cans.
WXII for also partnering with us by filming and airing promotional videos for the Fill the Stands With Cans games and by covering the games on their broadcasts.
PTAA’s staff who work hard throughout the year coordinating with Second Harvest and providing the Committee with the resources they need to do their thing.
I’m sure I forgot to thank some folks, so let me just end by saying, “Thank You! Thank You! Thank You!” to everyone who made this year’s Food Drive a tremendous success.
Now, if you’re reading this and still have food or money to donate, it’s not too late. Just contact Stephanie Beeman at PTAA (stephanie AT piedmonttaa.org) and she can help you out.
Probably the highest-profile project in Winston-Salem that isn’t in the Innovation Quarter is the repurposing of the old GMAC Insurance Building at 500 W. 5th Street. As part of that project, Grubb Properties is constructing a five-story mixed-use building that will include 224 apartments. Here are some of the details of their plans as described in an article in the Winston-Salem Journal:
Grubb has announced plans for a $48 million, five-story mixed-use facility that will stretch to the boundaries of Fourth and Poplar streets. It will contain a mini dog park and an adjacent “pocket park” off North Spruce Street.
Thomas said the plans include having five stories fronting on Fourth Street with retail on the first floor and four stories on the side adjacent to the 500 West Fifth Street tower...
Grubb has committed to making 5% of the apartments affordable to people making up to 90 percent of area median income, and 25 percent of the apartments having rents affordable by people making up to 110 percent of the median.
Thanks to everyone who has been participating in our 2019 Summer Food Drive, we’ve raised more than 415,000 meals for Second Harvest Food Bank this summer, and we’re on track to pass the total we raised last year.
Every dollar raised for the food bank can be used to provide at least seven meals to kids in need. How does that work? Through their partnerships with grocery retailers and the USDA, the food bank is able to source nutritious food, including fresh meat, dairy, fruits and vegetables. The food bank’s culinary program uses some of the ingredients to prepare hot meals, and they are distributed along with fresh food to local pantries, summer feeding locations and soup kitchens across 18 counties.
Our goal for 2019 is to raise half a million meals, and we’re looking for that last boost to get us to the goal by July 31.
It’s time for Jon to step in! We’re offering him up for auction to help us reach our goal. The winner of the auction will have Jon all to yourself at your corporate office or chosen property for one day! Jon has maintenance skills, salesmanship skills, and a wealth of industry knowledge and experience, and we’re happy to share him with you for a day.
You can place your bid by donating to the team “Jon Lowder” on our donation page (click the button below). If you haven’t used the page before, just click “Donate Now,” then “Search for a Participant or Team,” then begin typing “Jon Lowder.”
The MINIMUM bid is a donation of $500, which equals 3,500 meals!
The donation must be made between today and July 31
ALL DONATIONS will go to the food bank and are NONREFUNDABLE – regardless of whether or not you win the auction
Whichever company has made the highest donation by 11:59pm on July 31 will win the grand prize: Jon Lowder for a day!
The company with the second-highest donation will win 2nd prize: Jon Lowder for half a day (half the day, all the awesome)
Once the auction is over, Jon will follow up to arrange a day to spend on your property, and PTAA will be sure it is well covered in our social media and other publicity!
Questions? Contact Jon with any questions you have before you donate.
Yardi released its June Yardi Matrix Multifamily Report, its monthly summary of rental market conditions throughout the US, and found that the Triad’s rent growth is among the ten highest in smaller US metro markets. As you can see in the table below the Triad’s overall rent growth over the last year was 4.8%; “Lifestyle” rents increased by 6.2% and the “Renter-by-Necessity” sector of the market increased by 3.7%
A local developer is planning to build a 116-unit apartment community in an Opportunity Zone in Greensboro. From the Triad Business Journal:
Developer Jerome Myers has submitted a zoning application to the city of Greensboro for Technology Row, a 116-unit apartment community at 402-404 Penry Road, just west of the Interstate 840 urban loop in east Greensboro. Myers said the property is zoned for 72 units...
A New Jersey-based company currently owns ten shopping centers in the Piedmont Triad and has now entered the apartment market with the purchase of a Winston-Salem property. From the Triad Business Journal:
The Bedrin Organization, which owns 10 Triad shopping centers, has purchased Hilltop House Apartments in downtown Winston-Salem for $17.75 from retired Wachovia Corp. CEO and chairman L.M. “Bud” Baker in a deal that closed Monday…
The 169-unit community at 241 S. Cherry St., includes three buildings, and has an interesting history. The first building was built in 1962 as a Holiday Inn, later became a Best Western and was converted into 54 units in 2011 and 2012. The 50-room North Tower was built in 2012. The 65-unit South Tower was built in 2014 using pre-fabricated pod components.
“We are excited about where downtown Winston-Salem is going, with the arts and the culture that is there, with the Innovation Quarter,” said Garret Bedrin, who oversees acquisitions, leasing and investor relations for the New Jersey-based family company. “We want to make sure that there is a reasonably priced option for housing downtown.”