ACCESS LASVEGAS AUGUST | SEPTEMBER 2010
YOUR ACCESS TO THE LAS VEGAS MULTI-FAMILY HOUSING MARKET
Apartments Staging A Comeback People Who Moved In With Others Are Getting Their Own Places as Economy Improves, Driving Rents Slightly Higher Apartment vacancies fell slightly during the second quarter, the first drop in three years, as improving consumer confidence reversed the trend of renters doubling up or moving in with family during the recession. The improvement allowed landlords to modestly raise rents, though big increases aren't likely until U.S. job growth accelerates. The national apartment vacancy rate stood at 7.8% at the end of June, according to Reis Inc., a New York real-estate research firm. That was down from the 8% vacancy rate during the first quarter, which was the highest vacancy rate in 30 years. At the end of the second quarter a year ago, the vacancy rate was 7.7%. Rents gained by 0.7% during the seasonally strong April-to-June period, the biggest quarterly gain in two years. Not surprisingly, Washington, D.C., which has one of the strongest job markets in the
nation, posted the largest 12-month rent gain of 3.1%. The numbers mean that the renters' market of the past two years, where landlords showered perks such as two or three months of free rent to entice tenants, is drawing to a close. The balance of power hasn't swung "completely back to owners right now," says Hessam Nadji, managing director at real-estate firm Marcus & Millichap. "But we're well under way to see that balance shift back." Rents fell in just 10 of the 82 markets tracked by Reis, with the biggest declines coming in Orlando and Baltimore. Markets with a big oversupply of vacant and foreclosed entry-level homes are expected to remain weak. Phoenix and Las Vegas posted the largest year-over-year rent declines, of 2.3% and 2.9%, respectively. Vacancies are heavily dependent on job growth CONTINUED ON PAGE 7
ACCESSLASVEGAS August | September 2010
Apartment Sustainability: Phantom Load or the Future? Americans today are more sophisticated and savvy, so ... is the “Green” movement viable Source: Elizabeth Madrigal, Green Landlady
Fact: The only parts of our economy not stifled by our Great Recession are those with a strong connection to sustainability. Pick an industry and you get the exact same result. Construction? Green building. Consulting services? Energy and water conservation. Even food.
Here are some of the findings the Organic Trade Organization reported on April 22nd from its 2010 Organic Industry Survey: While total U.S. food sales grew by only 1.6 percent in 2009, organic food sales ($24.8 billion) grew by 5.1 percent. Meanwhile, organic non-food sales grew by 9.1 percent, as opposed to total non-food sales which had a 1 percent negative sales growth rate,” said Christine Bushway, OTA’s Executive Director. What has all this got to do with the multi-family industry? The apartment industry is undergoing this same dynamic. According to a recent website survey by Apartments.com, 88 percent of their responding visitors indicated a preference for living in a green apartment community. Apartment seekers care about the environment and are turning toward “greener” lifestyles at their apartment communities. To celebrate Earth Day on April 22, 2010, Apartments.com surveyed more than 1,400 of its website visitors across the country to reveal whether or not the environment impacts how and where they choose to live. According to the survey results, 88 percent of respondents said the environment is an important issue, which is evident in the way they live and even search for and select an apartment.” A quarter of this majority openly confirmed they would pay more for the privilege. Although 58% of respondents were undecided about the merits of the green premium – and another 24% were disinterested in the subject of greener living – we can all guess where this is going. The Green Premium Many small factors are combining to make the business case for sustainability in practices, operations, building materials and maintenance. Online renters are becoming the norm. Even many seniors – who have been the fastest-growing segment of Internet users for several years – search on-line as a first step in the apartment hunt. 2
The Apartment.com survey adds to growing documentation that green buildings earn higher rents for equivalent square footage and are just more appealing. Residents living in green cities like San Francisco, Seattle and Portland may pay a much higher green premium at the moment, but sustainability is and will continue to be a huge draw for tenants. Return on Investment Although renters are not always willing to disclose their willingness to pay for greener living, rent rolls in green buildings confirm they do. Luxury green units have always commanded higher rents and can skew the averages, of course, but luxury is still only a small segment of the overall apartment market even though it represents a large portion of the green building to date. However, this green rental premium benefit is holding true for retrofitted and recommissioned buildings as well. In fact, building recommissioning can often be performed at such minimal cost that the payback is generally under a year through utility savings alone. When increased asset value is added, the benefit of better energy and water efficiencies are compounded. Overcoming the Split Inventive Unfortunately the split incentive of owner-paid upgrades and tenant utility cost benefits has discouraged many owners from more
vigorously pursuing green operations. With the restriction of short-term profit orientation, managers need to employ life cycle analyses and life cycle costing to fully understand and present the benefits to owners. No one needs a survey to conclude that tenants with less utility expense may choose to apply more disposable income to rent. As a matter of fact, renters have been using the current ‘tenants’ market’ to upgrade locations, apartment quality, enjoy rent concessions, move to green buildings and to rent larger units. With tenants expressing plans to take further advantage this year, the offer of green living may be one way to compete and retain your current tenants.
As residents see these things or their friends point them out, negative thoughts may arise, like ... • • • •
Management doesn’t care. Our kids are being poisoned. The tenant newsletter, ha! They offer free shower timers on the one hand and then they have the “gumption” to callously waste water.
Green Raises Occupancy
This is the new American: the jaundiced-eyed, disenfranchised citizen who worries about everything from e-coli infection at the school lunch table to the community crops to stock food banks and kid’s asthma flares when the carpets are cleaned at home. All this sounds like a there is a hugh population segment Lobbying for Higher Wages class issue, but candidly it is not. The focused on independence from the few ‘Affordable’ green-certified ‘grid’ coupled with greater personal Often under the radar in discussions of sustainability. The last movement of this multi-family developments now in big multi-family, declining discretionary successful operation have also found that intensity was probably the kitchen income for the middle and lower classes the desire to live in a home free of toxins, Victory Gardens spurred by rationing has become a stubborn problem. This is and patriotic fervor during World War II. off-gassing and pesticides is a broad one why murmurs of rent control are and the appeal includes all becoming louder in national city council New Lifestyles Fuel Old socio-economic classes. These new green chambers. Further aggravated by the developments are showing occupancy Complaints recession and increased living expenses, rates of 100% and green lease terms average wages have been on the decline compliance as strong as the tenant But it is not just about food and new for over a decade. If multi-family is hobbies. Gym memberships fall sway to education provided by management. serious about a pay-as-we-go approach, hiking, biking and walking. ‘Hipster’ this is an area where the sector could In spite of our enduring ignorance about companies like Netflix and old timer’s successfully focus lobbying efforts. Not like McDonald’s offer $1 movie rentals to science and geography, Americans today only would it be tremendous PR for any encourage cheap, home entertainment as are sophisticated and savvy in some ways. management company fighting for the an affordable alternative. To summarize, We are also terrorized by the Media into rights of their tenants, but better wages all of these emerging American pastimes thinking that everything is contaminated mean the possibility of higher rents. and attitudes are actually keeping people and that if it keeps up we are all going to These in turn could be used to fund die. Ergo, some may not trust big home more. Again, what has this got to greater sustainability within the do with multifamily communities? More business – for which multi-family multi-family sector. Of course, everyone qualifies regardless of an individual people around more often breeds more worries that if people make more money awareness… and more complaints. owner’s size – some may not trust they will buy rather than rent, but is that politicians and some may not believe in a real threat with our credit markets in Evolution, but all Americans hold one Residents are there when the pest guy reverse along with the single-family home putrefies the air with chemicals. If the thing sacred and dear. The peaceful and market? Even renters who can afford to healthy enjoyment of our home. Make building’s recycling is awkward and buy feel the bloom is off the rose for a inconvenient, residents feel annoyed and your tenants happy and you won’t have few years at least. vacancies in your building or your wallet. resentful. The manager does a touch-up and tenants complain the VOC Job Dissatisfaction paints are off-gassing in the hallway. When work is less rewarding – and everyone from medical doctors to factory workers is admitting to very, very low morale and high job dissatisfaction – people become more interested in the family hearth. Hobbies focused on ‘old world’ skills like knitting and woodworking have taken on a new life. Other indications that Americans are feeding growth hormone to our infamous ‘individualistic’ genes, are the urban chicken coop movement, beekeeping and urban agriculture. Even municipalities are raising
They reprimand the landscaper for washing down the sidewalk or using a leaf-blower rather than a rake. And if the building sprinklers create runoff down the walkways or water the wall, residents will quickly let management know potable water is being wasted. Managers are learning that wireless access in all parts of the complex is necessary, as home now competes with Starbucks. Authentic greenies will feel shame if a garage is brightly lit 24 hours a day without people sensors. 3
ACCESSLASVEGAS August | September 2010
The Next Upcycle Source: Multi-Housing News
INVESTORINSIGHT The multi-family industry, and those who invest in it, is looking with anticipation, and some trepidation, at 2010 and beyond to see which markets will kick off the next upcycle. Everyone knows a rebound will come. For investors seeking future diamonds in the current rough patch, where and when are the big questions.
In particular, he points to Charleston, S.C., and Savannah, Ga., as port cities that will benefit from the anticipated completion of the Panama Canal Expansion project, due in 2014, finally allowing passage for the world’s largest ships from Asia.
Almost equaling government as a job-growth engine last year was health care, which is expected to continue to expand. Such markets as Columbus, Ohio; Boston; Philadelphia; Pittsburgh and parts of Cleveland have significant health sectors.
“There continues to be movement toward the South, and somewhat toward the Southwest,” confirms Bernard Markstein, vice president and senior economist, National Association of Home Builders. “Texas has been strong, making Dallas and Houston two of the better markets.”
Concentrations of colleges and universities also could see multi-family investment opportunities. According to Marcus & Millichap’s 2010 National Apartment Report, an expanding college-aged population and rising post-secondary enrollment bode well for the need for student housing over the next several years. Student housing outperformed traditional apartments in 2009, with vacancy remaining in the 7 to 7.5 percent range. This trend should continue through the remainder of 2010 as development in this segment slows by more than 50 percent.
“There are a number of factors that cause us to be optimistic about the multi-family industry and opportunities over the next 10 to 20 years,” says Chris Lee, president of real estate consulting firm CEL & Associates. Lee cites pent-up demand due to significant numbers of 20-somethings still living at home because of the dearth of jobs, aging baby boomers who increasingly will be downsizing into apartments and the current undersupply of units. But just where will the uptick begin earliest? Experts cite three prominent factors in identifying those parts of the country that hold promise: areas of strong job growth, markets with growing industries and city centers benefitting from in-migration. Experts say it may take until 2020 for the U.S. as a whole to recapture all the jobs that have been lost. Thus, seeking those distinct markets that will see jobs come back soonest could be key. “Clearly, the place to look for multi-family opportunities is where job losses have been the least,” says John McIlwain, senior fellow for housing with the Urban Land Institute. “Washington, D.C. is a very strong bet, although the entire region there has done very well, with actual employment gains.” Others points to the Sunbelt to resume its job growth, because it tends to be non-union with less regulatory restraints. Lee sees job growth coming to trade-oriented cities on the East Coast. 4
Finally, investors may wish to look closely at those metro areas with large military bases. Because of the federal government’s BRAC (Base Realignment and Closure) program, which reorganizes bases based on evolving military needs, new construction and investment opportunities may arise in these locales.
Neil Gronowetter, chairman of commercial brokerage Multifamily Investor, in New York, observes that the only major cities with positive changes in employment in the last two years were Austin (a little under 3 percent), Fort Worth (about half a percent), and Washington, D.C. (about a quarter of 1 percent). For the remainder of 2010, he predicts that the strongest job growth will come (in order) in Austin; Raleigh, N.C.; Fort Worth, Texas; Salt Lake City and Nashville. Vertical Promise Just as certain locales may benefit from job growth, bringing with it multi-family opportunities, certain industry niches may also have the same effect. Government is a key example, as it was the employer that grew the most in 2009, according to observers. Marcus & Millichap notes of Washington, D.C. that job growth and stabilizing revenues will keep initial yields in the low 7 percent range for most apartment assets this year.
“Fort Bragg, N.C., is seeing some building,” Markstein observes. “However, it’s very localized, and the usual players -- those who deal with the government on a regular basis -- have already moved in.” Mass Movement A longer-term trend that favors rental and multifamily housing is increasing urbanization. The U.S. Environmental Protection Agency has documented a movement back to the urban core in many markets, with specific areas more than doubling their share of permits pulled for their “central cities.” Consider New York City. Contrary to what many may think, in the early 1990s the New York City metropolitan area (which includes large swaths of suburburn-like Brooklyn, the Bronx and Queens) saw only 15 percent of all residential building permits issued for its central-city cores. By the mid-2000s, that average had skyrocketed to 44 percent, and in 2007 hit 55 percent. Other metro regions also have seen dramatic infill. Chicago’s central city area, for example, saw its share of
No Joke: Property Manager Fined $85K for Breaking Lead Paint Law
residential permits rise from 7 percent to 40 percent over the past 20 years. Portland, Ore., went from 9 percent to 33 percent, and Sacramento, Calif.’s city center permits grew from 9 percent to 25 percent. “Part of this trend has to do with things like energy and the constraints on the use of carbon-based fuels,” says McIlwain. “People want to live closer to their work.” Underscoring this, Marcus & Millichap note of Houston that the anticipated completion in 2012 of the METRORail Green Line extensions will connect Texas Southern University and the University of Houston to the downtown core, creating demand for infill apartments near rail stations, as well as generating construction jobs. By contrast, some cities saw little or no infill change, so the urbanization movement (and thus multi-family opportunities) may not have much of an impact in these locales. They include Dallas; San Jose, Calif.; Pittsburgh; Kansas City, Mo. and Buffalo, N.Y. Hartford, Conn. was alone in seeing its percentage of infill building permits fall over the past two decades. An obvious caveat of the EPA study, of course, is that its figures stop in 2007, before the worst economic times had their fullest impact. And yet, as a measure of consumer demand, the infill trend carries value and can be expected to resume. Combining the factors of job growth, strong industries and in-migration, the ULI’s McIlwain notes, “Watch the performance of the traditional 24/7 cities. It will vary in each market, but take a look at Seattle and San Jose, which are both high-tech sectors, and which is continuing to do well. Then there’s San Francisco, San Diego and parts of Los Angeles. Boston, with health care and the mutual fund industry, will remain strong. Many parts of Texas are doing very well because oil prices are continuing to stay high.”
and the prospects for resumed hiring, the state’s severe overbuilding will continue to hurt occupancy and rent rates. But Markstein points out that savvy investors look at more than the soundest, most stable of markets. Here, even Florida can be in play. “If you set your cost basis low enough, you’ll always get a payoff,” he says. “The smart business people are the ones, presumably, who know how to make money in both down and up markets. Obviously, if you can purchase at a low enough price, you may need only 60 to 70 percent occupancy to make the project pay. And if you get any more than that, then wow, that’s great. That’s the business calculation.” In addition to Florida, Markstein says those investors “who really know what they’re doing” can sniff out good deals in the severely depressed markets of Phoenix and Las Vegas. Last year, Phoenix saw the median price of an apartment property decrease 27 percent, to $42,100 per unit. Marcus & Millichap predicts that prices there likely will continue to recede well into 2010 as more distressed assets change hands at a discount. In Las Vegas, meanwhile, maturing debt will compel many owners to put their properties on the market over the next three years. These will have to be discounted to meet buyers’ demands and risk tolerance.
Boston landlord, John C. Jones, is being fined almost $85,000 for failure to properly disclose the presence of lead paint to his tenants. “Lead from paint, chips, and dust can pose serious health hazards if not taken care of properly,” says the Environmental Protection Agency. According to the EPA, Mr. Jones managed several properties and failed to disclose information on the dangers of lead paint exposure to tenants prior to them moving in and while signing their lease agreements.
The EPA is now enforcing lead-based paint requirements that went into full effect this April. These rules apply to all people from contractors to property managers who may be renovating a house or apartment building that was built when lead-based paint was common. The Federal government banned the use of lead-based paint in 1978, so if your building was constructed before that year, chances are you have a lead-based paint compliance issue. The EPA (United States Environmental Protection Agency) states the following: LANDLORDS must disclose known information on lead-based paint and lead-based paint hazards before leases take effect. Leases must include a disclosure form about lead-based paint.
What about the hidden opportunities that many investors, focused on strong fundamentals, might overlook?
SELLERS must disclose known information on lead-based paint and lead-based paint hazards before selling a house. Sales contracts must include a disclosure form about lead-based paint.
Consider bruised and battered Florida. Despite its continued population growth
Buyers have up to ten days to check for lead hazards.
ACCESSLASVEGAS August | September 2010
Multi-family Property Sales In First Half Of 2010 Far Exceeding 2009 Levels Source: NuWire Investor
Sales of multi-family properties in the first half of 2010 were substantially higher than the same period last year. While transaction levels in 2010 are still expected to remain significantly below 2007 levels, experts believe sales of multi-family properties will continue to remain strong through the end of the year, with some areas doubling or tripling 2009 levels. With a spate of big-ticket sales, the apartment market is rumbling out of the economic chasm that captured transactions nationwide over the past two years. In Phoenix, for example, a 629-unit apartment complex sold earlier this month for $45.5 million.
The nation’s hottest market for transactions is Washington, D.C., says Ari Firoozabadi, vice president of investments for Marcus & Millichap Real Estate Investment Services. “We have closed more apartment transactions going into July of 2010 than we did in all of 2009. So I expect the number of transactions to triple this year.” His group, based in Washington, closed two multi-family property deals for $7 million and $2 million. However, planned renovations bring the total investment to near $20 million for both deals, he says. Firoozabadi recently listed a 159-unit apartment complex in Greensboro, N.C., Lake’s Edge Apartment Homes, priced at $4.2 million. Located near Guilford College, the complex’s listing has already drawn 23 responses from potential buyers, although no offers have been made, says Firoozabadi. “I think it’ll take us around 45 days to effectively market the property,” he adds.
Continental Realty Advisors, a multi-family property owner based in Denver, bought The Canyons Luxury Apartment Community and plans to invest nearly $2 million in renovating the apartments over the next two years.
Nationwide, in the first half of 2010, $11.6 billion in multi-family property transactions were recorded, significantly higher than the $7.7 billion total registered in the first half of 2009, according to preliminary figures from Bethesda, Md.-based research firm CoStar. That amount is expected to rise as more transactions are counted, the company notes. However, the 2010 volume is still projected to be 74% lower than in 2007, according to CoStar. 6
extent that the best deals may evaporate in a year, he explains. The Phoenix sale involving Continental Realty Advisors is another sign showing the market’s steadily improving health, says Firoozabadi. “Phoenix got hurt pretty badly with the downturn of the economy. Now, you’re seeing investors moving into markets like Phoenix.” The transactions are a good sign, he says. “When there’s activity it’s healthy. If it’s transacting, it’s health.”
What Do Apartment Dwellers Really Want? Source: ApartmentGuide.com
Nationwide apartment rental firm ApartmentGuide.com says the majority of apartment seekers between June 2009 and June 2010 looked for apartments in the $500 to $700 price range, followed by $700 to $900.
The apartment owner had sold its holdings in the Phoenix market in early 2007 and is glad to return, says David Snyder, chairman of Continental Realty Advisors. “Continental’s greatest asset in the current market is the ability to close on an all-cash basis within very quick time limitations,” adds Jason Rosa, director of research at Continental Realty Advisors.
Distance from a major city center was a factor, with the majority of apartment hunters seeking homes within five miles, followed by 10 miles, then 20 miles.
“The market has improved over the last 180 days,” Firoozabadi says. “We’re seeing larger deals getting done this year because the pension funds and the insurance companies are back in the market. They’ve got equity and they’re putting it to work.” After the long period when few deals were done, the market is abuzz with pent-up demand, he says. “What I’m hearing from investors is that there is another 12 months of buying opportunities.” The market is improving to such an
These are the other top features that apartment seekers sought over the last 12 months: • • • • • • • • • • • • • • •
Washer and dryer in unit Pets (allowed) Air conditioning Some paid utilities Washer and dryer connections Dishwasher Balcony Garage Cable-ready Furnished available Fitness center Swimming pool Short-term lease available Gated access Oversized closets
Smaller Apartments, Closer to Transportation Are the Future Source: Multi-Housing News
Multi-family development is a tough game these days. Yet there are seasoned vets still in the game who have seen every part of every business cycle in recent decades, and for them the current sluggish economy is just one more. It’s been a very deep contraction this time around but one that can be survived. Joel L. Altman’s company, the Boca Raton, Fla.-based Altman Cos., has developed, acquired and managed more than 16,000 apartment and condo units over more than four decades, both in southern Florida and elsewhere in the country. It continues to be a multi-family player, slogging through hard times with some success. Its Ft. Lauderdale condo development called Sapphire, for example, caught in the worst of the Florida real estate slump right after its completion in 2006, sold only 10 units until the end of 2009. Since then, 44 units have sold. Once his company’s current condo developments are sold off Altman says he’s getting out of that business. The future, he believes, will be in rental apartments. Recently, MHN talked with Altman about getting through the worst of times, and looking forward to the demographic-driven recovery for the apartment sector during the 2010s. MHN: What kinds of multi-family properties are going to be in demand again, once the economy recovers? Altman: The future is in smaller apartments, in terms of square footage, and those that are closer to urban centers and transportation hubs. Size will decrease to save on costs, both development costs and operational costs. And proximity to transportation will be more important in the future because the cost of energy, especially fuel that
automobiles use, is going to go up again. MHN: Will people accept smaller apartments? Altman: They will, provided the properties are more convenient than they used to be, and I think that’s happening too. Just about everything can be done online, for instance -- you can pay rent, ask for a service call, schedule the use of facilities. We’re seeing the percentage of people taking advantage of that kind of convenience increasing, and we’re retrofitting our older communities to handle it. MHN: Will on-site amenities be more important to renters than they are now? Altman: In the future, many rental apartment communities will be able to offer similar packages of amenities as condominium communities do now. For example, in one property we’ve put in a spa operated by an outside vendor, and it’s by appointment. Also, we’re putting in demonstration kitchens that host cooking classes. It’s become a social event to go to one of these classes. That’s what residents will be looking for in a location, and that’s what apartments will have to provide to succeed.
Apartments Staging A Comeback CONTINUED FROM COVER STORY because many would-be renters typically double up or move in with family members during a downturn. The apartment sector's improvement comes as more renters who have jobs feel comfortable upgrading their living situation. "People today are more confident to say, 'I can go live in my own space and I don't have to keep hunkering down,"' says Victor Calanog, director of research for Reis. But landlords won't be able to boost rents significantly until the job market recovers. "Until we have the real increase in jobs, we won't have the pricing power," says Jeffrey Friedman, CEO of Associated Estates Realty Corporation, which owns and operates 12,000 units. Still, the apartment sector could benefit from some other trends. First, mortgage
lending standards are much tighter today than at any point in the past decade, which should keep more renters from leaving to buy homes. That is a big change from the last downturn, when "people who couldn't qualify to rent were qualifying to buy homes," says Alexander Goldfarb, an analyst at Sandler O'Neill & Partners LP. Second, the lack of financing for new apartment construction over the past two years has constrained the pipeline of new supply that should hit the market in the next two years. The apartment sector, which added between 100,000 and 150,000 units annually over the past decade, is on pace to deliver just 60,000 units in 2011 and 2012, according to Marcus & Millichap. That lack of new supply is "allowing the apartment sector to do a lot better, faster than anyone in the industry anticipated," says Mr. Goldfarb. It is unclear how long the sector will benefit from those supply constraints. The relatively healthy outlook for apartments has attracted considerable capital but apartment sales haven't picked up. Story Written by Nick Timiraos of The Wall Street Journal - Real Estate © 2010 Dow Jones & Company, Inc. All rights reserved.
ACCESSLASVEGAS August | September 2010
Las Vegas Metro Occupancy Trends July 2009 through June 2010 91% 90% 89% 88.94%
ar ch M
y ar Ja
be em pt
OVERVIEW: This is the first time the vacancy rate has declined below 10% since March of 2009. With over 112,000 total units reporting, we believe this is a substantial representation of the overall market. Source: Spencer Ballif and Jeff Swinger of CB Richard Ellis (Las Vegas) (112,005 Apartments Surveyed in June)
Las Vegas Snap Shot
Source: Red Capital Group
JULY 2010 YEAR-TO-DATE REPORT With one of the country’s highest May 2010 unemployment rates (14.1%) and its highest mortgage default rate (1.5% of metro homeowners received a foreclosure filing in May), finding a silver lining behind Las Vegas’ dark cloud isn’t easy. Indeed, Sin City seems to be at the confluence of all of the U.S. economy’s worst cross-currents: real estate speculation gone awry; weak consumer discretionary consumption; plunging corporate entertainment and convention spending and excess debt leverage all around. With this in the background, it doesn’t surprise that the best news received in the month was that the number of state chapter 13 personal bankruptcy filings declined year-on-year for the first time in four years. By way of employment trends, metro payrolls fell at a 53,500-job, -6.3% rate in the first quarter, up from 4Q09’s 77,500-job setback. Trends improved further in April and May, when average y-o-y losses dropped to a 17-month low 34,500. The improvement was attributable largely to slower attrition in the key construction, retail trade and leisure services sectors. Year-on-year cuts in these industries decreased from 47,900-jobs in 2H09 to 39,000 in 1Q and 25,000 in the 12-month period ended in May, accounting for the lion’s share of the 30,700 metro jobs lost overall. After cutting -7,300 jobs expressed on a seasonally-adjusted basis in 1Q10, Las Vegas created net jobs in April and May, posting the first consecutive month add since 4Q07. The advance totaled only 700 jobs, however, which included a net of about 3,800 temporary Census positions that will be eliminated by the end of the summer. Las Vegas’ bad luck streak is running its course, and RCR expect the metro to begin anteing up y-o-y gains early next year. But growth is likely to remain in low gear for a time, limiting annual gains to 8,600 jobs in 2011 and 18,500 in 2012, following a loss of 30,500 (-3.6%) positions this year. Apartment demand was moderately stronger in the first quarter, as a combination of fresh product, stabilizing job prospects and lower rents lured tenants back into the market. Properties absorbed a net of 471 units during the period, representing the first rise in occupied stock in 18 months. The average occupancy rate fell anyway, this time 80 basis points to 88.5%, as developers brought six projects to market encompassing 1,669 units. New luxury supply notwithstanding, average asking rents fell during the winter, declining for the fourth consecutive quarter. Face rents dipped - 0.6% to $820, the lowest level recorded in four years. On the other hand, rent concessions receded as well, holding the sequential effective rent decrease to $4 (-0.5%) to $775. Submarkets west of the strip exhibited the strongest performance. Vacancy rates in the West and Spring Valley submarkets remained in the single digits and rents were essentially unchanged sequentially. By contrast, North County markets reported weaker than average conditions as heavy supply exerted pressure on occupancy levels and rent trends. Reis expect market conditions to deteriorate further by year-end as developers deliver nearly 2,000 units to the market. The service projects that occupancy will decline 50 bps to 88.0% by December, while rents remain at March levels. Reis are more optimistic regarding the forecast out-years, however; the service projects a return to strong job growth by 2011, triggering a 380 bps occupancy rate rally by 2014, accompanied by annual effective rent growth averaging 2.1%.
Access Investment Offerings COMMUNITY (UNITS)
PER UNIT PRICE
BROKER / CONTACT INFORMATION
Winsome West Apartments (228)
Elite Realty / 702.743.8991
Sun Gardens (300)
Hendricks & Partners / 702.866.6239
Hendricks & Partners / 702.866.6239
Tara Hills (140)
Grubb & Ellis / 702.733.7500
Bonanza Apartments (36)
H & L Realty / 702.385.5611
Access Recent Transactions CLOSING PRICE
PER UNIT PRICE
Charleston Plaza (64)
June 18, 2010
The Siegel Group
June 8, 2010
Henderson Plaza (68)
June 1, 2010
Flamingo Chateau (136)
May 10, 2010
Tiah Thee Kian
Canyon Creek Villas (215)
April 29, 2010
For additional information and / or broker information on Access Investment Offerings and / or Access Recent Transactions contact Bret Holmes at 702.699.9261.
ACCESSLASVEGAS August | September 2010
Las Vegas Apartment Rents At Lowest Rate In 6 Years Source: Las Vegas Sun
Apartment rents continued to slide during the second quarter in the Las Vegas Valley to their lowest level in six years, but the occupancy rate at complexes has leveled off, analysts said. The average monthly rent requested by landlords during the second quarter was $765, down from $777 in the first quarter, according to Applied Analysis, a research and consulting firm. Landlords were charging $857 in the second quarter of 2009, meaning rents have dropped nearly 11 percent in a year, the firm noted. The apartment market has been hurt by people leaving the valley because of the loss of gaming and construction job, analysts said. Some tenants have turned to buying or renting homes because of low prices and low lease rates. “Much like the market experienced in the hotel industry during the past two years, apartment owners are finding the need to reduce prices in an effort to maintain their occupancies,” said Applied Analysis Principal Brian Gordon.
Gordon said the price-cutting should start to slow within the next six months, but the job market will determine the timing of the apartment market’s recovery. The occupancy rate during the second quarter was 90.7 percent, about the same as the first quarter. That is still well below five-year historical averages of 93.7 percent, the firm reported. The flow of renters to homes could slow because of the expiration of the homebuyer tax credit and the possibility that interest rates will rise by the end of the year, said Jake Joyce, project manager at Applied Analysis. The highest average monthly rent charged in the valley during the second quarter was $919 in the southwest valley. The lowest average rent was $648 in the northeast. The central/east part of the valley had average rents of $696. Others include the northwest, $770; north, $781; west, $766; south, $776 and southeast, $840.
Board Advances Plan For Apartments Near South Point Casino Source: Las Vegas Sun
Although the down economy has left many construction projects in Clark County stalled, one developer is moving
forward with plans to build an apartment complex in the south valley. The Enterprise Township Advisory Board unanimously approved a plan by LV Pyle, LLC, for a 320-unit complex at the corner of Pyle Avenue and Haven Street. That area is near the South Point casino. The board approved plans for the apartment complex despite passionate protests by neighboring property owners, who said the location is unsuitable for such an influx of residents. They also said the complex would infringe on what was once a rural residential area. “We’re fighting for our lifestyle,” said Jerry Nelson, who raises horses on her property across Haven Street from the planned apartments. She was one of 10 residents who came to Wednesday’s meeting to express concerns about the complex. Greg Borgel, a planning consultant for the developer, told board members that new residents could stimulate commercial growth and generate jobs. Board member J. Christopher Dapper agreed and said the area, which is less than a mile from Las Vegas Boulevard, is destined for growth. An apartment complex is a good way to encourage it, he said. Residents referenced the valley’s high apartment vacancy rate in opposing the plan. “It’s not the time to build apartments,” Caroline Doehrmann told the board. She lives on Haven Street, near where the complex would be built. She backed up her statements with research from housing analysts at Red Capital Group. The developer’s land, which is zoned as limited resort and apartment, is adjacent to the neighbors’ land, which is zoned rural residential. The board’s members said the plan is compliant with county code and zoning requirements, leaving little room to deny the application.
The board approved the plan with stipulations for a barrier wall and a landscaping buffer with pine trees and other vegetation. It will be presented to the Clark County Commission in August.
Get Your “A” Game On
Source: Stephanie Moore, Moore Design Group
The multi-family industry is certainly feeling the effects of increased competition. It’s hard to imagine anything you would want to invest in these days, but smart money places its bets on creating opportunity with cosmetic improvements. We are fortunate to be aligned with an industry that maintains extremely strong fundamentals and prospects for long-term growth. With the right tools and right attitude, any space can be transformed into a more comfortable, relaxing and competitive environment. Capitalizing on renters’ desires for urban-style living is a fundamental decision many owners / operators are making. Apartment homes need to live up to the expectations they set, since renters today have their pick of living situations. Market conditions change, but confident management decisions do not. By developing methods in a thoughtful manner to better understand what residents need beyond what they articulate, we find the opportunities that will create real value. Some developers provide market studies with focus groups to determine what the needs are for potential residents. Management also bases this on the response of residents, both verbally and by use. We need to create community, strengthen it and appeal to consumers’ need for it. The excitement and appeal of an urban mixed-use neighborhood influences new design trends in multifamily, with the ultimate goal of enhancing attractiveness to new occupants and increasing lease retention for existing ones. Basic Cosmetic Improvements Budget prioritizing is key. Less money means fewer choices, so select the rooms and elements that are most significant. Analyze your current conditions to determine if you should replace furniture or start with minor construction details. Improve what you already have instead of completely starting over.
Paint is truly your best friend; it creates dramatic change for little money. Update cabinets and built-ins with paint -- you will have a clean, fresh space. Hide the clutter -- nothing improves the look of a space more than neatness and organization. Remove silk plants that are lifeless and dusty, and replace dated window treatments. Removing walls is also an inexpensive technique to open up a room that is tired, dated and / or closed in (be sure to consult your professional contractor). If finishes are your priority, select a ceramic or porcelain tile that has a large format and use the same material throughout, as floor changes will break up a space and make it appear smaller. If you have a fireplace, fix it up with paint, a new mantle and a large mirror or artwork. Lighting is always an overlooked element that can improve any space. And don’t forget to add artwork. It’s a symbol of quality; think of it as adding cosmetics to your space. Creating a Community Every area of a clubhouse requires finishes to be specified, and every space needs attention in creating a desired concept. The creation of a stylish interior within a fixed budget is possible. By creating a strong architectural framework of relatively inexpensive materials, the interior scenes can be crafted using rich materials and textures to draw the eye through the space. Color selection is also critical. People enjoy being surrounded by a palette that is soothing and makes them feel comfortable. A range of local colors can be blended and sparked by hot “new” hues for an appealing, nurturing backdrop. The best lobby design is one with simple, clean lines, with quality soft seating and communal tables for gathering. Illuminated museum quality art,
whenever possible, lends an air of drama and discerning taste, drawing the eyes of passersby on the street. A special focus on maximizing the clubhouse is also effective. Create a luxury boutique-hotel atmosphere with spaces for innovative activities and services provided in the clubhouse. The result is inevitable interaction among residents due to the very shape and configuration of the space. The clubhouse also offers an upfront spot to greet potential residents, with a clear picture of their apartment choices. Evoking the atmosphere of a boutique-hotel lobby can be highly attractive in a clubhouse, given that multi-family developers are increasingly marketing to people who are highly educated, well-traveled and have clear expectations of the quality of their home environment. Other exciting amenities are a fully equipped executive conference center with TV, computer, phone and copier with multiple capabilities, as well as a library and reading room, and a game lounge with billiard tables, shuffle board and a refreshment lounge. Large-screen plasma televisions are displayed in the game lounge and the new Wii gaming area. High ceilings, up to 20 feet, along with expansive window treatments and vibrant lighting further enrich the theatrical flavor of the clubhouse’s overall appearance. The goal is to create an experience for the potential resident that will be remembered and retained, leading the individual to choose to live in that community. These approaches -- creating a luxury boutique-hotel atmosphere, planning spaces for innovative activities and services provided in the clubhouse and offering a powerful presentation of these options from the moment a potential resident steps foot on the property -- can positively impact the multi-family bottom line through strong resident attraction and high retention. 11
ACCESSLASVEGAS August | September 2010
Local Property Management Firm Selected Best Companies To Work For Nevada Business Magazine’s annual search for the best of the best began several months ago. In the midst of an economic downturn unlike any we’ve seen in recent history, being named one of the “Best Companies to Work For” is quite an achievement. The employees at Advanced Management Group, a property management firm, love their jobs and are not shy about showing it. That’s big praise for a company that operates within one of the most depressed industries in Nevada. Even so, the company has found a way to take advantage of a down real estate market and has doubled in size since 2008. “Isn’t that crazy?” says Bret Holmes, president of the company. “We attribute that to great work ethic, hiring the right people and happy clients.” The firm was founded in November of 2006 and has approximately 60 employees. In addition to standard benefits, provided at no cost, the company has the loyalty of its employees because of the management’s genuine, caring attitude towards its staff. “I care about the employees because without them I wouldn’t have a company,” says Holmes. “It’s not all about me, it’s not all about what I can do and who I know and what I’ve accomplished. Without the right people in place, we wouldn’t be able to continue to do what we’ve been doing.” You can contact Advanced Management Group directly at 702.699.9261. For information, article consideration and featured columns ACCESSLASVEGAS can be contacted at 702.699.9261. The publisher of this newsletter is The Internal Press.
ACCESSLASVEGAS 2775 South Rainbow Boulevard, Suite #101-C Las Vegas, Nevada 89146
Published on Aug 16, 2010