Last week we shared an article about the effect that Airbnb is potentially having on rents. This week we’ve found an item about potential new players in the short-term rental market, and their interest in working with property management firms. From the Wall Street Journal:
The short-term residential rental business, which got its start with people putting spare rooms on the lodging market, is knocking on the door of some of the country’s largest landlords.
A venture-capital group that includes hotelier Barry Sternlicht has invested in a startup that plans to add a new upscale and branded dimension to the short-term rental business pioneered by companies like Airbnb Inc. and HomeAway Inc…
“Consumers want short-term rentals and they want them at a scale that no one ever anticipated,” said Fifth Wall co-founder Brendan Wallace.
Numerous other startups are pushing into similar businesses, including Arlington, Va.-based WhyHotel and YouRent.com of Miami. Meanwhile, Airbnb in 2016 launched its own “Friendly Buildings Program” under which landlords put rental units on the website.
An Airbnb spokesman last week said there were 13,000 units in the program, up from 10,000 in July.
Many landlords are still skeptical about working with these companies, but that could change as property management firms become more familiar with the new short-term companies. And of course, if vacancies begin to rise then working with these firms could become a much more enticing option.
According to an article in the Wall Street Journal rents are beginning to level off nationwide:
After a five-year boom in which rents have jumped by about 20% nationwide, some of the nation’s biggest cities—New York, San Francisco, Seattle and Boston among them—are beginning to see slower increases. Annual rent growth for high-end urban apartments peaked at nearly 8% at the end of 2011 and has since slowed to just over 3%, according to MPF Research, which tracks the apartment market.
The downdraft is likely to become more pronounced as many of these cities see increases in the number of new apartments being delivered in 2016 and 2017. In 25 of the largest U.S. cities, multifamily permits in urban areas were up 39% in 2015 compared with a year earlier, according to a study by housing-research firm Zelman & Associates.
However, things are still good for the apartment industry:
Economists say the overall apartment market remains solid. Rents are continuing to rise quickly for more moderately priced apartments in the suburbs, tempering the urban slowdown.
You can read the full article here (Requires subscription to WSJ).
From an item published by CoStar Group:
New apartment completions and construction starts continue to trend upward, and the new supply of units is beginning to show up in rising vacancy rates in a number of high-growth U.S. markets…
Vacancy rates in the 54 largest markets tracked by CoStar Group remain at a 10-year low. However, the trend has clearly begun to reverse course. The national vacancy rate has risen roughly 30 basis points over the last three quarters to about 5.5% as supply has overtaken demand, and CoStar is forecasting another 50-basis-point rise in vacancies through the second half of 2014.
Translation – it isn’t happening in secondary or tertiary markets like Greensboro-High Point or Winston-Salem. It’s also restricted to high-end properties:
And while new construction for multifamily housing has picked up in recent months, analysts have also noted that demand for rental housing continues to show strength. As a result, the vacancy uptick has been restricted to Four- and Five-Star properties in markets such as Boston, Austin, Minneapolis and Washington, D.C. Vacancies in Three Star properties haven’t yet seen much movement.
“While the impact of new product will certainly trickle down to the Class B space, it hasn’t happened yet,” Yuen said.
Have you signed up for the PTAA dinner meeting tomorrow night, April 15, 2014? You really should, because we have renowned apartment industry speaker and educator Lisa Trosien as our keynote, and she’ll be talking about emerging trends in the industry. Below you’ll find a YouTube video of a webinar Lisa did a couple of years ago, and while it’s a different topic it should give you a great feel for the kind of speaker she is. We hope you’ll join us tomorrow evening for a nice dinner and some great education.
From an article on GlobeSt.com:
In addition, more Millennials, a.k.a. Echo Boomers, entering the market should also help boost fundamentals. “In the past year, new developments have been met with strong renter demand, particularly for contemporary product in A+ locations that are heavily favored by today’s Echo Boomers,” Jeff Meyers, president of Meyers Research, tells GlobeSt.com. “This demographic of 95 million is obviously important because they are transitioning into the workforce, and detached shadow inventory is not competitive for this young cohort.”
It will be interesting to see if these folks, who have come of age at a time when the American Dream of home ownership turned into a nightmare for so many, will decide to stick with renting longer than their parent’s generation did. If so, then they could impact the housing sector as strongly as the original Boomers did back in ‘the day’.
According to analysis done by the Triad Business Journal the apartment industry is a contributing factor to the Triad’s improving construction employment numbers:
So just what’s going on in the Triad? Construction experts across the region point to number of factors that collectively contribute to the growth, such as institutional construction at colleges and universities, health care systems investing in new facilities, apartment construction going gangbusters, public projects such as the Guilford County jail and theGreensboro Aquatic Center, and numerous highway and bridge projects across the region.
The growth could also be reflective of the hit the Triad took in the recession. UNC-Charlotte banking professor Tony Plath says it’s difficult to give definitive data, but his sense is that the Triad suffered pronounced losses, particularly in commercial construction, in the recession.
“The Triad suffered a little bit more. The downturn was a little harder there in 2007 and into 2008,” Plath says. “Then the trajectory out of the downturn was a little bit better.”
According to this post on NAA’s blog, explosive growth is forecast for the apartment industry and one result may be a shortage of qualified employees that could lead to a sharp increase in on-site pay:
Our industry is so broad and so diverse that we accommodate people with a wide variety of experiences. For example, John says one big area of growth is in the information technology departments of property management companies. They need data analysts who can help them sort through information and use it to better run their business. He also expects the industry will see continued demand for service and maintenance personnel. We may even see a shortage as the applicant pool for these positions shrinks. That’s alarming.
Property managers know maintenance staff are critical members of a community’s team. They are the ones who are on the front lines of customer service and who often interact the most with residents. The low wages typical of manual service jobs may be deterring people from pursuing these positions, he says.
That may soon change. To attract and retain the best talent, John says, companies are realizing they have to increase salaries. He predicts the industry will soon see significant pay increases, especially for on-site staff. “If you’re trying to complete for the top level talent, you have to pay to play.”
According to a report by Marcus & Millichap the vacancy rate for apartments in the US is expected to decline to 5% by the end of 2012:
Hessam Nadji, managing director, research and advisory services at the firm, tells GlobeSt.com that “Demand for rental housing will remain robust in 2012 as strong demographic trends combine with shifting consumer behavior. The total population within the prime 20-34 year old renter cohort has increased dramatically, and will increase by an additional 2 million through 2015,” he says. “As this age cohort continues to face significant hurdles to homeownership and as the tight employment market encourages flexible housing decisions, many of these new households will continue to favor renting.”
In addition, Nadji says, though foreclosure activity has begun to recede from peak levels, homeownership rates have declined dramatically since reaching their 69.2% peak in 2004. “The most recent readings place homeownership at 66.3%, and this sharp decline has significantly added to rental housing demand. As a result, rental housing will remain a favored choice for the coming year.”
Nadji tells GlobeSt.com that “strong demand trends will continue to pressure rental housing stock, and although many developers have begun to ramp-up construction plans, substantive increases in construction remains one to two years out.” Presently, only 85,000 new apartments are anticipated for 2012, he says, “a significant shortfall from the forecast demand of 120,000 apartments in 2012. This will press vacancies to the 5% range by year-end, the lowest level since 2001, and empower owners to advance effective rents by 4.8%.”