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Demand Still Isn’t Outpacing Supply

A report from WHEC in New York. “A bank filed to foreclose on five Rochester properties owned by developer Bob Morgan, according to paperwork filed with the Monroe County Clerk’s Office. The Tompkins Bank of Castile claims a number companies controlled by Morgan defaulted on their mortgage loans worth $4.2 million. Earlier this week, ESL Federal Credit Union filed a notice of foreclosure for an apartment complex in Henrietta owned by Morgan. Last month, News10NBC was in Buffalo when Bob Morgan was indicted on federal charges, including money laundering and bank fraud.”

From King 5 News in Washington. “RealPage found 3,400 apartments in Seattle got new renters between January and March, marking the first time since last spring that more new units were filled with renters than were built. It also follows a dismal fall and winter when Seattle added new renters in just 286 units.”

“The RealPage report found Seattle’s rental demand is ‘stronger than it has been in a while,’ but still isn’t outpacing supply. Over the last year, Seattle added 12,250 new apartment units, just over 10,000 of which were rented out.”

“Seattle is expected to build another 12,375 apartment units this year, according to a RealPage analysis of multifamily building permits. ‘With this competitive environment, rent growth is likely to soften slightly over the next few quarters as developers continue to bring new units to market faster than renters can fill them,’ the report said.”

From Chicago Business in Illinois. “The owner of McClurg Court, the second-largest apartment complex in downtown Chicago, is seeking a buyer for the Streeterville property with a simple pitch: It’s an affordable rental option in a market crowded with new high-end buildings. The complex has good amenities on par with more expensive buildings, including tennis courts, a sports room and outdoor fire pits, bocce court and grilling areas.”

“Downtown apartment values have soared the past several years. Development has surged as well, fueling worries about a potential glut, but demand is so strong today that rents are expected to keep rising. Most of McClurg Court’s 1,061 apartments are outdated, but that could be appealing to investors that seek out so-called value-add opportunities. A new owner could boost the value of the property by fixing the apartments, replacing appliances, kitchen cabinets and flooring, said Peter Evans, president of Moran’s eastern region. Then the investor could raise rents, increasing the property’s income and ultimately, its value.”

The Indy Star in Indiana. “Renter reflect the high demand for Downtown living, a trend driven by amenities such as walkable streets, contemporary restaurants and bustling nightlife. Not surprisingly, the market has responded. So much so that Downtown’s apartment development has grown at a faster pace than demand.”

“Apartment vacancies in the past three years have risen nearly 50%, driven up by the addition of new apartments on market. A glut of large luxury developments are expected to add more than twice as much new inventory in 2019 than last year.”

“As many as 1,300 new apartments are projected to be delivered Downtown this year, according to Downtown Indy Inc. The majority are clustered of three large developments, said Hannah Ott, Cushman & Wakefield executive managing director. From a hot tub and private balconies and patios at Penrose to the outdoor saltwater pool at CityWay 2.0 and the virtual doorman and rooftop sundeck at The Whit, many of the area’s apartments tilt toward the upscale.”

“‘These new properties that are coming in 2019, because they are brand new and high-end, they’re going to have the highest rents,’ Ott said. ‘So they’re going to be over what we’re seeing in the market right now.'”

“Still, it’s not uncommon for apartment owners to offer rent concessions in their initial leasing period to have good leasing momentum, Ott added. Rental deals can range from $500 off the first month’s rent or one month free with a 13- or 14-month lease. ‘We are seeing some concessions on the newest product,’ Ott said, ‘but not anything that’s a-typical.'”

“Brad Vogelsmeier, director of development at Milhaus, developer of Downtown complexes Artistry, Circa and 747, said Indianapolis’ overall housing market was under supplied prior to the Great Recession of 2008. ‘For the past few years, I think we’ve seen a lot of supply come online to kind of catch up from where we were previously,’ Vogelsmeier said. ‘I think what we’re kind of seeing now is a leveling out, or a correction, from that previous period.'”

The Dallas Morning News in Texas. “A Houston apartment landlord just signed one of the biggest leases in that city’s history. Developer Camden Property Trust rented a block of 100 apartments in its new downtown Houston residential tower to a single tenant. More than a third of the 21-story high-rise will be rented to a Washington, D.C.-based firm for what it calls a ‘pop-up’ hotel.”

“Founded in 2017, WhyHotel leases big chunks of apartment buildings to use as short-term stay hotel space. Since Dallas-Fort Worth is the country’s fastest-growing metro area and economy, don’t be surprised if WhyHotel turns up here, too. The D-FW area has more than 35,000 new apartments on the way, with about a dozen high-rise rental projects either under construction or just completed.”

“Some North Texas apartment community owners already are dabbling in the short-term stay sector, with units up for grab on websites including Airbnb and Vrbo. ‘Look for some properties in Dallas to begin offering short-term rentals pretty quickly,’ said Greg Willett, chief economist at RealPage. ‘The concept is worth exploring in neighborhoods where apartment construction is heaviest, especially in spots like the Victory area where there are multiple lease-up projects located adjacent to each other.'”

“That means some of the folks you meet in your apartment tower elevator aren’t neighbors but visitors in town for a weekend sports event. ‘What’s unclear at this point is whether or not renters signing long-term leases will care that a portion of the property is being operated as what’s essentially a pop-up hotel,’ Willett said. ‘If long-term renters object to the degree that it slows a new project’s leasing velocity or lowers pricing power, short-term leasing will disappear quickly.'”

The News Press in Florida. “A memory care center in Estero is headed for an auction after a multimillion-dollar foreclosure. Lenders foreclosed on the property after the owners defaulted on a more than $10 million loan in 2018, according to court records. The center opened Nov. 5, 2016. It’s one of dozens developed and owned by The LaSalle Group, a Dallas-based development group, which is facing financial woes.”

“LaSalle voluntarily filed for Chapter 11 bankruptcy protection on May 2. The company is owned by Mitch Warren, who last month told Senior Housing News that he stepped down as the company’s chief executive to smooth the way for a financial restructuring — and that ‘all operations will continue uninterrupted and as usual at all Autumn Leaves locations.'”

“LaSalle has been hit with a slew of lawsuits, unable to meet all of its loan and rent obligations and pay all of its vendors in many of its markets. The company has blamed its financial problems on a surge in the construction of assisted living centers in recent years, which has created greater competition and pushed down rental rates for senior housing.”

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This Post Has 47 Comments

  1. ‘LaSalle voluntarily filed for Chapter 11 bankruptcy protection on May 2. …LaSalle has been hit with a slew of lawsuits, unable to meet all of its loan and rent obligations and pay all of its vendors in many of its markets. The company has blamed its financial problems on a surge in the construction of assisted living centers in recent years’

    The bones keep piling up. The MSM still hasn’t put the pieces together on the multifamily bubble or the debacle playing out in senior housing.

  2. ‘Apartment vacancies in the past three years have risen nearly 50%, driven up by the addition of new apartments on market. A glut of large luxury developments are expected to add more than twice as much new inventory in 2019 than last year…’These new properties that are coming in 2019, because they are brand new and high-end, they’re going to have the highest rents…So they’re going to be over what we’re seeing in the market right now’

    They are fooked Hannah.

    ‘Over the last year, Seattle added 12,250 new apartment units, just over 10,000 of which were rented out’

    And there were thousands sitting empty prior to that with thousands more on the way – some shortage Seattle!

      1. This actually makes sense to me and I agree with the premise with an some qualifiers. The only way this happens is enough people want to move up and spend more money and are able to do so. If that occurs, then there would be fewer buyers at the lower price points who are not competing there. I am seeing this a lot around Salt Lake City where there are some older buildings that have an unusual amount of for lease signs out and are offering pretty good concessions.

  3. “‘These new properties that are coming in 2019, because they are brand new and high-end, they’re going to have the highest rents,’ Ott said. ‘So they’re going to be over what we’re seeing in the market right now.’”

    Good thing they built all this luxury housing. I’m sure they will have lines around the block looking to fill them…

    “Still, it’s not uncommon for apartment owners to offer rent concessions in their initial leasing period to have good leasing momentum, Ott added. Rental deals can range from $500 off the first month’s rent or one month free with a 13- or 14-month lease. ‘We are seeing some concessions on the newest product,’ Ott said, ‘but not anything that’s a-typical.’”

    Oh… never mind, time for a fire sale! Calling all Chinese, IPO millionaires, and students, We built these for you, not desperate here but what will it take to get you to sign? 1,2….3 months free rent, amazon gift card?

    1. Not that you can find an article about easily on yahoo or MSN but with the Mexican deal, there will be less need for apartments.

    2. I said it many times before. 95% of the new apartment construction has been chasing the top 15% of prospective renters. Designed for the fresh out of college STEM major Millennial who landed a job at Amazon.com or some other big tech company, who doesn’t own a car, but might own a 9 pound designer dog, and priced accordingly.

      All those lovely new towers… who will fill them?

  4. It seems like the iPhone and luxury apartments have reached the same fate. In the end, creating a product which is too expensive for your consumers, however desirable the product may be, is not a sustainable business model.

    corrected earlier post should read: Not that you can find an article about it easily on yahoo or MSN but with the Mexican deal, there will be less need for apartments.

    https://www.breitbart.com/economy/2019/06/08/donald-trumps-mexico-deal-democrats-sad-media-mope/

    1. Seeing that in private schools in Hawaii – many are going belly up. Some of these cost 10-15K+ per year. With the high cost of living and taxes of all types being raised people are having a harder time making ends meet and having less kids.

      Also, tourism numbers are down and I just heard on the radio jobs in the state are down too with the biggest hit in the construction segment. Hawaii always has a tight relationship with discretionary income (and borrowing yellen bucks too) in that if the west coast is popping, HI feels it – tourism up, people buy condos and second homes here, locals get some of that honey and construction takes off as everyone gets dollar signs in their eyes. When things start to fade, this places gets rough. We’ve just entered the rough phase. And for many in this state, its been rough a long time because the job market is so thin, with low wages and high costs.

    1. ‘According to Realtor.com, Pelley, 61, paid $4 million for the house in 2007 and is now selling it for $750,000 less than what he paid for it.’

      Hasn’t sold yet.

    2. “Pelley, 61, paid $4 million for the house in 2007 and is now selling it for $750,000 less than what he paid for it.”

      2007?

      Let me fix this so they can cut down on the articles.

      Anyone, any age, who paid any amount for a house in 2007 is now selling it for a lot less than what he or she paid for it.

      1. Let me fix your fix, Jeff.

        “Pelley, 61, paid $4 million for the house in 2007 and is now selling it for $750,000 less than what he paid for it.”

        “Pelley, 61, paid $4 million for the house in 2007 and is now ASKING $750,000 less than what he paid for it.”

        (What a creditworthy buyer might eventually decide to offer this market-chasing greedhead for his shack is anyone’s guess.)

        1. I sold in late 2005 here in SE Region IV and thought I got out just in time, but someone sold in the same hood at the same price in late 2006 or early 2007. By 2009 those places could be had for 1/3 the price.

      3. Not in San Diego. Properties that were sold in the 2006-2007 time frame are selling for significantly more now. The top end of the market is still under water but the median 3/2 house in a median neighborhood is selling for 10-20% more now than it did in 2007.

        1. The U.S. Consumer Price Index for All Urban Consumers was around 200 in early 2006. The latest reading April 2019) was about 255.

          (200/255-1)*100% = -21.6% is the inflation adjustment one should apply to the current dollar value of a home before comparing to its 2006 value. After adjusting for appreciation and HODLing costs (interest, insurance, depreciation, maintenance, taxes, etc.), most of the mom-and-pop investing geniuses who bought San Diego residential investment properties around 2006 are already underwater in real terms, and the situation is not moving in their favor.

  7. Looks like Seattle n Atlanta are duking it out for biggest inventory jump.
    I thought chicago would be #1

  9. When do we discuss why people are fleeing Nicaragua in the first place? Better than waiting until they get to our border to deal with.

    1. People are fleeing Nicaragua because it’s a corrupt, oppressive socialist basket case (redundant, I realize). But that’s not our problem to fix. Illegals flooding in across our southern border, on the other hand, is definitely our problem to fix, even if the Democrats would rather not.

      1. What baffles me is how everyone (especially the blues) act like it IS our problem to fix, and a higher priority than our own problems.

    1. Every car maker that wants to sell in China is going to have to make EVs. When they had the Olympics and the world took a look at just how terrible their pollution is the party decided that they would go full bore into EVs. Also, the public is clamoring for cleaner air to the extent that they can voice their opinion on social media. Look at this new EV made by Buick that just launched:

      https://insideevs.com/news/352556/buick-velite-6-launches-china/

      1. I think the biggest driver is that plates for a car in Shanghai or Beijing are over $10k if you can even get them. EVs are exempt from that. It’s huge.

  13. With 10-year Treasury yields plummeting towards 2.00%, the labor market weakening from a base of near-record low unemployment, and the Fed threatening renewal of extraordinary accommodation, I’m wondering if the 10-year Treasury yield is destined to retest its all-time lows over the next few years.

  15. OT: I just finished a 3 yr lease on a 2016 Mazda CX-5. Handed it back in last mo in great condition under 36k. Got a letter today asking me to send in a check for $520 for 2 “worn” tires. (right side F and R)
    1. Tires had normal wear and tear, at least 15k left on all of them, always had them rotated with an oil change.
    2. A replacement tire for that car is $106 for a Yokohama.
    I just know this will end with, “fine, we will send you to a collection agency.” Chase sucks. Need to fight them hard on this. First and last time I lease with Chase.

    1. That’s why I’ve always been reluctant to lease cars, I don’t want arguments about wear and tear when returning.

      Is it the bank doing this to you or the dealership? I would have thought they would have to point out the alleged excessive wear at the time you returned the car.

      Save all documents/pictures and know your rights when dealing with collection agencies. If you dispute the validity of the debt in a timely fashion and send them documents and pictures they may back off.

  17. It’s true — San Francisco is a mess. And everyone knows it
    San Francisco Chronicle-16 hours ago
    Sooner or later, every San Franciscan is going to have to answer this question: Why … All the problems that were here before got worse: traffic, housing prices. ..

    Welcome to Garcetti’s LA: heaps of trash, hordes of rats and very little …
    Los Angeles Times-21 hours ago
    … because of a history of flat wages and soaring housing costs, and because local …

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