Piedmont Triad Apartment Market Remains Hot – Where is it Hottest?

Real Data’s October survey results show that the apartment market remains very strong in the Piedmont Triad. Their market summary says it best:

The Triad apartment market is tightening with an average vacancy rate at just 4.0%. Over the last year demand has been strong with 2,348 units absorbed, easily offsetting the 1,595 units added to the supply over the same time period.

The development pipeline includes 2,814 units under construction and another 2,141 units proposed…

The region has posted strong rent growth of 3.8% over the past twelve months. The average rental rate is now $876 per month, as compared to $832 just twelve months ago. One bedroom units average $769, two bedrooms rent for an average of $869 and three bedrooms rent at $1,093 on average.

The report also indicates that the average vacancy rate should hold close to 4.0% for the next year and rents will continue to grow at a yearly rate of 3.5-4.5%.

Source: AptIndex.com

So which submarkets are the hottest in the Triad?

  • Occupancy – Guilford Northeast (97.5%)
  • Average Rent – Guilford Central ($1,091)
  • Average Rent per SF – Forsyth Central ($1.172)
  • Units Under Construction – Forsyth Central (573)

To get a full copy of the Real Data October, 2018 report go to aptindex.com.

One-Off or Early Signs of a Trend?

Those of us who were around pre-Great Recession can remember a time when it was relatively commonplace for apartment communities to be converted to condos. Then the mother of all recessions happened and rental housing became the most lucrative, and safest, real estate game in town and we stopped seeing those conversions – if anything we saw condos converting to rental units.

That’s what makes the news of this move in Winston-Salem pretty interesting. From a story in the Triad Business Journal:

Winston-Salem investors Ben Bloodworth and Taylor Williams purchased the 836 Oak Street Lofts apartments in downtown Winston-Salem for $2.75 million with plans to convert the 26 apartments in the former mill facility into condos.

The purchase included 1.22 undeveloped acres adjacent to the apartments.

Bloodworth told Triad Business Journal that all current leases would be honored, and the units would be upfitted and sold as the leases expire.

Downtown Winston-Salem is experiencing a boom of new housing, retail, restaurants and entertainment with the growth of the Wake Forest Innovation Quarter, including the Bailey Power Plant, and the office renovation projects at the GMAC tower.

Downtown Winston-Salem is a particularly hot market in the Triad right now, so this might portend a larger trend across the region, but it will be interesting to see if other investors follow suit, especially in the downtown markets of the Triad’s cities.

GCAA Names New Executive Director

Today the Greater Charlotte Apartment Association had a big announcement:

The Greater Charlotte Apartment Association (“GCAA”) has named Kim S. Graham as its new executive director.

“We are extremely pleased to welcome Kim as our new executive director,” said Jennings Snider, president of the GCAA board of directors and Chief Financial Officer with SYNCO Properties. “Kim is an outstanding fit for us, given her strong background in housing, public policy, community engagement and nonprofits. Her management and interpersonal skills are peerless. This is a landmark day for the GCAA.”

Graham most recently served as senior vice president of outreach and fund development with The Housing Partnership, a Charlotte-based housing nonprofit corporation. She will assume her duties on December 1, replacing Ken Szymanski, who will retire at the end of 2018 concluding an illustrious 32-year tenure as GCAA’s executive director.

“I’m honored to have been selected by the board to lead this dynamic organization. I look forward to building on the foundation created by Ken, the professional staff, engaged board and members at the Greater Charlotte Apartment Association,” said Graham.

During her time with The Housing Partnership, Graham doubled the organization’s grant revenue while implementing place-based programs to protect seniors from tax lien foreclosure and expanded access to resources for neighborhood improvement projects. Graham’s experience also includes stints with United Way of Central Carolinas as its public policy manager and with the NC Parent Teachers Association as a regional program manager. Prior to that, Graham worked in the private sector for national and mid-market public accounting firms.

Graham holds a Bachelor of Arts degree in English from Johnson C. Smith University and a Master of Public Administration degree in urban management and policy from the University of North Carolina at Charlotte.

“This is an exciting day for the Greater Charlotte Apartment Association. Kim has the consensus-building tools, insight and resolve to ensure that we grow and stay relevant. Her skills and demeanor are such a good fit for the GCAA,” said Szymanski.

About The Greater Charlotte Apartment Association

Established in 1977, the GCAA is a trade association of multifamily rental housing developers, owners, managers and suppliers. Collectively, its members house over 300,000 persons in every income strata, every geography, and every ethnicity of the Charlotte region.

Co-Living Not Just for Students Anymore

With the growing popularity of shared workspaces (think We-Work) it probably shouldn’t surprise anyone that shared living spaces are beginning to catch on. Of course, the student housing sector has been using this model for years, but in the market rate apartment world it hasn’t been seen until very recently. One issue is that local ordinances often prevent them, but as the affordable housing issue becomes more prevalent in virtually every city and town across the country, both housing providers and municipal leaders are looking for creative solutions and co-living looks like a good option. The Wall Street Journal recently ran an article that had some interesting data about this new housing approach:

This product, which is less than 10 years old and found primarily in large U.S. cities, represents only a tiny niche in the multibillion-dollar apartment industry. But developers are now preparing to build some of the largest new co-living properties in North America, a sign that the appeal of this type of housing could be broadening…

San Francisco-based co-living startup Starcity last week agreed to purchase a development site in downtown San Jose where it plans to build a 750-unit co-living building…

Rents at the company’s properties range from about $1,600 to $3,100 a month—not cheap but less than the average studio apartment rents in the Bay Area. Half of the rents at the new San Francisco property will be even further below market, affordable to people making as little as $35,000 a year, under new state legislation that streamlines the permitting process for projects with an affordable component.

“To tackle our affordability crisis we need both private sector solutions and public sector solutions,” said San Jose Mayor Sam Liccardo, referring to his city’s new co-living project.

 

Charlotte Builder Looking at North High Point Multi-Housing Project

North High Point is experiencing a significant amount of growth, and now it looks like the area might be getting a 600-unit housing development, including apartments. From an item in the Triad Business Journal:

The report says that Bunker Land Group LLC filed zoning applications with the city to build the units on about 80 acres near N.C. 66 and North Main Street, just south of Interstate 74.

Bunker wants to build 350 multifamily units, filling in the rest with single-family homes, twin homes and townhomes.

Home Sales Slump, Rental Market Rises

Home sales have slowed in recent months and according to this article in the Wall Street Journal, the culprits contributing to the slowdown in the for-sale market are rising prices, rising mortgage rates and the Trump administration’s tax bill that reduced incentives to own homes. That could be good news for the apartment industry:

Yet other analysts argue that all the gloom hanging over housing is good news for owners of apartments, like AvalonBay Communities , which is up 7.4% over the past six months, andEquity Residential , which has added 5.7% in that time. Rental-home companies have also gained, with American Homes 4 Rent climbing 3.8%.

“Having pressure on home sales is a positive for the rental side of the industry,” David Singelyn,  American Homes chief executive, told investors recently. “It should all fare very, very well for pricing power going forward.”

Source: Wall Street Journal

In fact, we could also see room for rents to rise in the near future:

Not only is the added cost likely to keep some renting longer, $135 is about 8% of the average monthly rent collected by American Homes, suggesting that there is room for these companies to raise rents and remain less expensive than comparable homes for sale, he said.

To that end, Freddie Mac said last week that about 78% of Americans view renting as more affordable than owning, a rise of 11 percentage points since the mortgage company released similar survey data six months ago. Freddie also said the proportion of respondents who said they have no plans to buy homes also rose.

Two PTAA Members Make Triad Business Journal’s Fast 50

Two of PTAA’s supplier partner members were named to the Triad Business Journal’s Fast 50 for 2018. Congratulations to United Finishers International and Got You Floored for their continued success!

From the Journal’s website:

Fast 50 – No. 4: United Finishers International Inc.
What does your company do or make? Sells cabinetry for multifamily developments
Industry: Residential construction
Year Founded: 1999
Top Executive: Juan Hernandez, president
No. of Triad employees: 15
No. of employees total: 15
Locations In Triad: One – High Point
How has your company grown in the past three years? Apartment construction continues to be strong, coupled with our focus on customer retention.
Share the primary driver of your recent growth. Great relationships with key customers. As they have grown and expanded, it has fueled the same for us.

Fast 50 – No. 47: Got You Floored
Company name: Got You Floored
What does your company do or make? Flooring provider to multi-family industry
Industry: Flooring
Year founded: 2000            
No. of Triad employees: 12
No. of employees total: 12
Locations in the Triad: One – Greensboro
How has your company grown in the past three years? Added experienced sales and sales support
Share the primary driver of your recent growth: The booming new construction, rental unit and apartment market has fueled our growth

Turnover Rates Hit Historic Low

Renters are staying put at a historically high rate. In the Executive Summary for their 2018 Income & Expense Survey, the National Apartment Association reported that:

…turnover rates sank to their lowest point on record (data available from 2000) at 46.8 percent. Owners strived to lower turnover costs by focusing on resident retention and increasing renewal rates. The U.S. Census Bureau reported a similar historic low in renter mobility rates in 2017 (21.7 percent) compared to 35.2 percent in 1988.

Source National Apartment Association

Key Takeaways from NAA’s Income & Expense Survey

The National Apartment Association recently published the results of their 2018 Income & Expense Survey, and offered some key takeaways in an Executive Summary:

  • Operating expenses increased by 2.1 percent, the slowest rate of growth since 2013.
  • Net Operating Income (NOI) grew by 5.8 percent, up 2 percentage points over 2016, impressive amid slowing rent growth.
  • Increases in payroll expenses were in line with wage growth in other private sector industries, averaging 2.4 percent.
  • The number of market-rent garden-style units per full-time employee increased for the third consecutive year to 44.3. The challenges of an ongoing labor shortage within the industry likely kept some communities understaffed throughout the year. Increased pressures on wages can be expected in 2018 and should be evident in next year’s survey results.
  • Once again, property taxes were responsible for the largest increase in expenses, up 5.3 percent year-over-year. The average property tax bill was $1,833 per unit and represented one-third of expenses. Fifteen years ago, property taxes comprised less than one-quarter of operating outlays. Contesting assessed values has become commonplace for many owners feeling the squeeze from skyrocketing taxes.

Click here to read the full Executive Summary and click here to order a copy of the survey results, which provide breakdowns for each metro market.

Printworks Mill Project in Greensboro Ready to Go

The financing is in place and work is ready to begin on the Printworks Mill project in Greensboro. From the Triad Business Journal:

The Alexander Co., developer of the Printworks Mill commercial and residential project across Yanceyville Street from Revolution Mill in Greensboro, will hold an official groundbreaking on the site Wednesday morning with stakeholders, local politicians and government officials on hand…

…Alexander has settled on 217 apartment units in three buildings, leaving the first floor of a four-story building near the corner of Fairview and Ninth for retail and restaurant space. He said the remaining three floors of that building, plus all seven floors of an adjoining building, will become storage space…

…plans call for the approximately 100,000 square feet of retail and storage space to be complete by June. He said the apartments, which make up the remainder of the approximately 470,000-square-foot project, are scheduled to be finished in August 2020.