Real facts newsletter national 11 2012-r-ental trends_v3

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Real facts newsletter national 11 2012-r-ental trends_v3

  1. 1. Monthly Multi-Family Report U.S. Market UpdateRental Trends ™ R e a l e s tat e m a r k e t i n s i g h t f o r t h e m u lt i - fa m i ly i n d u s t r y NO V e m b e r 2012in this issue...2 National Overview4 RealFacts Meyers INdex8 RealFacts Meyers Market Coverage9 About Us A M e y e r s R e s e a r c h P u b l i c at i o n
  2. 2. 2 Rental Trends National Market Review The U.S. multifamily market’s average national rent (for markets covered by RealFacts) continued its upward momentum, reaching a new all-time high of $1,042 per month in the third quarter of 2012, an increase of 4.8% from a year ago. The new peak also represents an increase of 1.3% from the previous quarter, with all three quarters of 2012 averaging monthly rents over $1,000. Given the lingering effects of the recent housing market crisis which continues to push former homeowners into the rental market and more Millennials entering the market, demand fundamentals should continue to be strong for rental units, keeping rents growing in the near term. Similarly, as households continue to postpone homeownership, occupancy rates have risen, with the average national occupancy rate increasing slightly to 93.9% in the third quarter. Although occupancy levels remain below levels seen in the late 1990s, we anticipate it will continue to edge higher in the short term, given the slow addition of new rental product to the existing stock, as well as the continued difficulties in the home mortgage market. Overall for 2012, rental rates are forecast to increase 4.2%, with an average occupancy rate of 93.6% for the year, as fundamentals continue to point to increased demand for apartments. National Average Rent $1,100 12% $1,050 9% $1,000 6% Average Rent $950 3% $900 0% $850 -3% $800 $750 -6% $700 -9% 1993 1995 1996 1997 1998 1999 2000 2001 2002 2003 2005 2006 2007 2008 2009 2010 2011 2012 1994 2004 Rent % Change Source: RealFacts National Occupancy Rate 100.0% 99.0% 98.0% Overall Occupancy 97.0% 96.0% 95.0% 94.0% 93.0% 92.0% 91.0% 90.0% 1993 1995 1996 1997 1998 1999 2000 2001 2002 2003 2005 2006 2007 2008 2009 2010 2011 2012 1994 2004 Occupancy Rate Source: RealFactsNov A Meyers Research Publication2012
  3. 3. Rental Trends 3 National Quarterly Trends $1,065 94.0% $1,045 93.5% $1,025 93.0%Average Rent $1,005 92.5% $985 92.0% $965 91.5% $945 91.0% $925 90.5% 4Q2009 1Q2010 2Q2010 3Q2010 4Q2010 1Q2011 2Q2011 3Q2011 4Q2011 1Q2012 2Q2012 3Q2012 Rents Occupancy Source: RealFacts Existing Properties by Class Existing Properties by Class Class A 8,955 Class A 1,731 70% Class B 13% 8,955 1,731 70% Class B 13% Class C 2,196 17% Class C 2,196 17% Source: RealFacts Average Asking Rent by Bed/Bath$1,600 $1,506$1,400 $1,302 $1,329 $1,192$1,200$1,000 $904 $944 $891 $800 $600 $400 Studio 1 Bed/1 Bath 2 Bed/1 Bath 2 Bed/2 Bath 2 Bedroom 3 Bed/2 Bath 3 Bedroom Townhome Townhome Source: RealFacts Nov A Meyers Research Publication 2012
  4. 4. 4 Rental Trends Multi-family Product Trends The recent strength of the apartment market, an aging stock of apartment units, and the influx of the large Gen Y demographic cohort has and will continue to reshape the apartment industry over the next decade. Since the recent recession, the trend in apartment units, along with the for-sale market, has shifted toward smaller unit sizes. This has largely been due to the need to offer homes and apartments at lower price points. Some of the newer apartment projects are even planning a majority of their units as one bedroom offerings versus the prevalence of two-bedroom units in the recent past. The emergence of micro units of roughly 300 square feet of space – even smaller than a typical studio – is drawing a lot of attention. These micro units are popping up in high-density, urban areas such as San Francisco, New York, and Boston, and they are appealing to the Gen Y renter who is searching for walkable, more affordable, urban living. Another notable trend geared towards the needs of the Millennials is a strong technology focus in both the apartment units themselves, as well as in the leasing offices and community amenities. Apartment communities targeting the Gen Y group are transforming their leasing offices into a completely wireless experience, offering a modern and dynamic feel, similar to Apple stores. Web-based technology is also a must for these prospective tenants, who desire the ability to contact management, pay rent, and get service through the internet 24/7. The business center of old is now more of a cyber café with universal Wi-Fi expected, and in-unit home networking and IPod docking stations the norm. These technology-focused features are important to Millennials, and apartment communities looking to capture this group have begun offering these elements to meet their needs. RealFacts Meyers Index Across the country, the rental market continues to strengthen. Consequently, RealFacts Meyers’ investment index tracks 28 metro areas throughout the United States. Eleven indicators including rental increases, occupancy, absorption, job growth, multifamily permit levels, and estimated cap rates for stabilized properties are compiled and measured against historical averages. The subsequent weighted investment index offers a benchmark of the apartment industry for each metro area from a standpoint of an investor looking at ground-up development. The nation overall scored a 5.3 on the scale, increasing slightly from our previous analysis. All but two of the areas (Las Vegas and Boston) saw an annual increase in rents (with Boston showing no change), and almost three-fourths of the markets analyzed saw occupancy levels hold steady or increase from last year. “Gateway cities” continue to characterize the top tier markets, which saw rents trend 7% higher from a year ago. Occupancy rates in these markets average about 95%, and high investment interest keep CAP rate levels around 4% to 5%. Not surprising, the bulk of the top markets have a heavy tech influence, a sector that continues to hire a younger-than-average workforce who is generally well-paid and highly mobile. The most significant ground-up growth (based on multifamily permit level change) can be found in Austin, San Jose, Minneapolis, Denver, and Charlotte. These markets have seen permit levels more than double from a year ago.Nov A Meyers Research Publication2012
  5. 5. Rental Trends 5The middle tier markets experienced an uptick in rent of 3% from year ago levels, while occupancy levels remained at 94%on average. CAP rates in these markets are generally in the 5% to 6% range. This tier includes all of the Southern Californiamarkets, along with Jacksonville, which was a bottom-tier market earlier this year. Jacksonville has improved significantly overthe past year, with rents rising 3%, occupancy increasing 1%, and multi-family permits increasing over 200% from the previousyear. While most investment activity has been focused on new ground-up construction near employment cores, with most Alocations already taken, interest in value-add investment opportunities will increase. Walkability or access to mass transportationand proximity to jobs are key factors for these markets. Development activity will increase significantly over the next severalyears, but timing of market entry and exit will be more critical.The bottom tier only includes Las Vegas this quarter, with Jacksonville moving up to the mid-tier markets. Las Vegas experienceda decline of 1% in both average rent and occupancy rate from a year ago. This market saw a significant ramp up in new for-salehousing during the previous housing cycle and subsequently, was one of the hardest hit markets in terms of foreclosures and shortsales. The glut of newly built distressed housing that is affordably priced competes directly with the rental market. Although therent to mortgage payment ratio is only 1.58X in Las Vegas, qualifying for mortgages remains difficult, and the rental market canexpect to recapture many of these previous homeowners, particularly younger singles and couples. Top Tier Middle Tier Bottom Tier 7.1 Austin 5.9 Los Angeles 4.0 Las Vegas 6.9 San Jose 5.7 Portland 6.9 Washington D.C. 5.7 San Diego 6.8 Minneapolis 5.7 Orange County 6.8 San Francisco 5.3 Miami 6.5 Dallas 5.3 United States 6.5 Denver 5.2 Phoenix 6.4 Charlotte 5.0 Tampa 6.4 Oakland 4.5 Chicago 6.3 Baltimore 4.4 Atlanta 6.2 Houston 4.3 Jacksonville 6.2 Seattle 4.2 Inland Empire 6.2 New York/New Jersey 4.1 Sacramento 6.1 Boston 4.1 Detroit Nov A Meyers Research Publication 2012
  6. 6. 6 Rental Trends RealFacts Meyers MF Investment Index Apartment Metrics Rents vs. 3Q 2012 Annual % 3Q 2012 Annual % % of 2011 Units Mortgage Class A Annualized Metro Area Rent Change Occupancy Change Class A Absorbed Payment Est. Cap Rate 1/ MF Permits Austin $950 6% 94% 0% 20% 2,199 1.22x 4.25 - 5.00 10,173 San Jose $1,980 10% 95% -1% 10% 815 0.83x 4.00 - 4.75 4,304 Washington D.C. $1,669 3% 95% 0% 12% -74 1.26x 4.00 - 4.75 10,469 Minneapolis $1,116 3% 95% 4% 0% -19 1.63x 4.00 - 5.25 3,350 San Francisco $2,372 11% 96% -1% 12% 960 0.88x 4.00 - 5.00 3,308 Dallas $831 4% 94% 0% 10% 6,466 1.41x 5.25 - 6.25 18,033 Denver $1,009 8% 95% 1% 19% 1,303 1.07x 5.00 - 5.75 7,319 Charlotte $763 9% 94% 0% 2% 170 1.28x 4.75 - 5.50 5,784 Oakland $1,627 9% 97% 0% 10% 768 1.04x 4.75 - 5.75 1,478 Baltimore $1,339 6% 94% 0% 4% 30 1.45x 4.00 - 4.75 2,577 Houston $835 5% 92% 1% 12% 5,432 1.37x 4.75 - 5.50 14,396 Seattle $1,158 6% 94% 0% 15% 468 1.10x 5.00 - 6.00 9,077 New York/New Jersey $2,521 11% 96% -1% 19% 61 1.85x 4.75 - 6.50 19,434 Boston $2,086 0% 96% 0% 28% 68 1.59x 4.00 - 5.00 4,862 Los Angeles $1,751 5% 96% 1% 20% 1,135 1.38x 4.75 - 5.50 8,742 Portland $954 6% 96% 0% 12% 825 1.13x 5.00 - 6.25 2,715 San Diego $1,456 4% 95% 0% 15% 798 1.06x 4.25 - 5.00 4,098 Orange County $1,628 5% 95% 0% 14% 513 0.87x 4.00 - 5.25 3,534 Miami $1,259 4% 95% 1% 14% 300 1.69x 5.00 - 6.00 7,920 United States 2/ $1,042 5% 94% 0% 13% 37,785 1.59x 4.75 - 5.75 271,388 Phoenix $755 3% 92% 0% 14% 4,322 1.41x 5.00 - 5.75 2,700 Tampa $870 3% 93% 0% 8% 532 1.65x 5.50 - 6.50 3,560 Chicago $1,221 2% 94% -1% 10% 92 1.80x 5.25 - 6.50 2,651 Atlanta $875 3% 92% -1% 18% 211 2.35x 5.00 - 5.75 5,073 Jacksonville $846 3% 92% 1% 15% 296 1.76x 6.25 - 7.00 2,178 Inland Empire $1,107 2% 94% 0% 22% 427 1.67x 5.75 - 6.50 1,517 Sacramento $963 1% 94% -1% 12% 457 1.57x 6.00 - 7.25 303 Detroit $879 3% 94% -1% 21% 5 4.04x 7.25 - 8.00 416 Las Vegas $746 -1% 92% -1% 13% 872 1.58x 5.75 - 6.75 1,277 Source RealFacts; Census; NAHB, Bureau of Labor Statistics; Indeed.com 1/Estimated Cap rate from a survey of brokers (CBRE, Marcus & Millichap) for stabilized properties. 2/United States rental stats reflect data collected by RealFacts, which includes coverage of 96 MSAs in 14 states.Nov A Meyers Research Publication2012
  7. 7. Rental Trends 7 Supply Demand Job Class A Annualized MF % of Jobless Postings % of Investment. Cap Rate 1/ MF Permits % Change Total Permits Job Growth Rate Per Capita Renters Index Metro Area - 5.00 10,173 153% 55% 26,400 5.9% 76 47.9% 7.1 Austin - 4.75 4,304 105% 74% 21,000 8.5% 153 43.3% 6.9 San Jose - 4.75 10,469 9% 47% 41,300 5.5% 120 37.4% 6.9 Washington D.C. - 5.25 3,350 141% 39% 23,100 5.7% 70 39.2% 6.8 Minneapolis - 5.00 3,308 40% 89% 29,700 7.0% 77 52.2% 6.8 San Francisco - 6.25 18,033 73% 50% 49,100 6.9% 61 37.9% 6.5 Dallas - 5.75 7,319 152% 57% 29,300 7.7% 85 38.0% 6.5 Denver - 5.50 5,784 347% 46% 8,500 9.7% 72 40.0% 6.4 Charlotte - 5.75 1,478 9% 52% 21,800 9.2% 0 47.0% 6.4 Oakland - 4.75 2,577 26% 39% 6,300 7.7% 96 49.0% 6.3 Baltimore - 5.50 14,396 77% 33% 96,600 7.0% 61 35.5% 6.2 Houston - 6.00 9,077 76% 53% 56,400 8.0% 75 41.5% 6.2 Seattle - 6.50 19,434 28% 75% 138,300 9.1% 44 47.3% 6.2 New York/New Jersey - 5.00 4,862 88% 55% 49,300 5.9% 96 29.9% 6.1 Boston - 5.50 8,742 14% 77% 66,100 10.2% 30 53.7% 5.9 Los Angeles - 6.25 2,715 32% 36% 12,400 8.1% 58 34.5% 5.7 Portland - 5.00 4,098 31% 65% 28,000 9.0% 59 29.0% 5.7 San Diego - 5.25 3,534 39% 63% 24,300 7.7% 0 41.4% 5.7 Orange County - 6.00 7,920 142% 62% 7,600 8.9% 28 36.5% 5.3 Miami - 5.75 271,388 45% 36% 1,806,000 7.8% 11 34.5% 5.3 United States - 5.75 2,700 67% 17% 48,900 7.4% 62 31.6% 5.2 Phoenix - 6.50 3,560 95% 38% 11,900 9.0% 57 43.7% 5.0 Tampa - 6.50 2,651 -27% 33% 38,700 8.8% 51 32.9% 4.5 Chicago - 5.75 5,073 107% 36% 31,400 8.9% 61 25.1% 4.4 Atlanta - 7.00 2,178 227% 33% 6,300 8.7% 54 36.9% 4.3 Jacksonville - 6.50 1,517 12% 27% 16,400 12.3% 22 36.9% 4.2 Inland Empire - 7.25 303 -51% 10% 16,600 10.3% 49 41.0% 4.1 Sacramento - 8.00 416 -18% 9% 28,600 10.0% 47 38.0% 4.1 Detroit - 6.75 1,277 5% 17% 5,100 12.3% 49 47.9% 4.0 Las Vegas Nov A Meyers Research Publication 2012
  8. 8. 8 Rental Trends RealFacts Geographic Footprint RealFacts Database Facts ■■ Database of 12,861 Properties ■■ 2.8 Billion Square Feet of Apartments ■■ 92 Consecutive Quarterly Updates of Rents & Occupancy ■■ 96 MSA’s in 16 States ■■ More than 3,300,000 Units ■■ 136 Individual Search Criteria Used Alone or Combined ■■ Over 4,800 Sales Transactions Recorded in the Past Eight Years ■■ 95% of the Database Resurveyed Each Quarter ■■ 19 Year History for Individual Complexes ■■ 23 Years of Experience 1989-2012 For more information on RealFacts, contact Nick Grotjahn at 415.884.2480 x:2Nov A Meyers Research Publication2012
  9. 9. Rental Trends 9About UsMeyers LLC Advisory Services & Analysis■■ Multi-family feasibility studies■■ Highest and best use analysis■■ Consumer research■■ Portfolio strategy■■ Cash flow analysis■■ Planning and entitlements■■ Mitigation management■■ Project management and development Valuation Financial Analysis Market Insight • portfolio strategy • debt, equity, and partnership • quarterly newsletter tracking nation’s • feasibility study restructuring largest markets • highest and best use analysis • sell/hold sensitivity • database of land sales • product repositioning • investment fund strategy • strategic partnerships with state • assest management • recapitalization economists Market valuation on over $2 billion in assets Proprietary cash flows on all property types. Over $500 million in land transactions in 2010. tracked quarterly.Upcoming Events Nov. 15 Milken Institute Summit California Jan. 22 NAHB International Builders’ Show Feb. 26 2013 Housing Market Summit Mar. 17 Crittenden Multifamily Conference 2013 Nov A Meyers Research Publication 2012
  10. 10. REALFACTS is the original apartment data source….the source behind the source. We are trusted by our clients for good reason. Our data is always reliable, always dependable. We conduct surveys that are 100% primary research. All the data we publish is collected, updated and372 Bel Marin Keys Blvd # H maintained in our own office by our highly trained and competent staff.Novato, CA 94949-5639415.884.2480 To learn more about RealFacts visit www.realfacts.com or contact us atwww.realfacts.com 415.884.2480 x 2. Meyers LLC has extensive experience in the real estate development industry, advising a long list of national and local apartment developers and financial institutions. We understand the challenges our clients face, and can apply our expertise in research, analysis and capital sourcing to18401 Von Karman Ave., Ste. 350 ensure they prosper—today and in the future.Irvine, CA 92612949.640.0050 | 949.640.0055 (fax) To learn more about Meyers visit www.meyersllc.comwww.meyersllc.com Methodology and source list can be made available by request.

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