Multi-Housing News - December 2008 - (Page 16)

market report Best Multifamily Bets for 2009 While job losses and shadow inventory will pose challenges, a few metros look relatively promising By Teresa O’Dea Hein, Managing Editor Global recession, tight credit, nationwide layoffs and volatile gas prices have cast a harsh light on America’s multifamily markets. “Flat is pretty darn good this year—that can put a metro area in the top tier of all U.S. markets,” predicts Greg Willett, vice president for research and analysis at M/PF YieldStar Inc., based in Carrollton, Texas. “Bullish is a relative term for 2009,” Willett says. Job losses and competition from shadow inventory will pose significant challenges, industry observers warn. Nationwide, employers continued to slash positions in September, according to the Labor Department. September saw a net loss of 159,000 jobs—the biggest one-month drop in five years and the ninth straight month of losses. Year-to-date losses reached 760,000, across a wide variety of sectors. The unemployment rate, meanwhile, remained at 6.1 percent. Also in the third quarter of 2008, Fannie Mae reported its fifth consecutive quarterly decline, a record loss of $29 billion as the housing slump deepened and it wrote down a tax-related asset that had buoyed capital. Freddie Mac reported a similar loss; neither forecasts a brighter future soon. Against this background, the landscape across the U.S. is less than promising for 2009. While this article focuses on the top multifamily markets for 2009, PN Hoffman recently developed The Flats at Union Row condominiums, designed by SK&I Architectural Design Group, in the still-active Washington, D.C. metro market. Photo by Maxwell MacKenzie Top Market Current Conditions* I Washington, D.C. Occupancy 94.9%, Annual Rent Growth 2.8% I Denver Occupancy 94.7%, Annual Rent Growth 2.8% I Minneapolis Occupancy 95.2%, Annual Rent Growth 3.9% I Fort Worth Occupancy 92.3%, Annual Rent Growth 2.8% I San Francisco Occupancy 96.4%, Annual Rent Growth 3.2% I Raleigh Occupancy 92.7%, Annual Rent Growth 1.3% I San Diego Occupancy 96.3%, Annual Rent Growth 3.5% I Pittsburgh Occupancy 97.5%, Annual Rent Growth 3.6% * As of press time; courtesy of M/PF YieldStar it must be noted that most industry observers are, not surprisingly, less than optimistic about prospects for the coming year. In its recently released 30th annual “Emerging Trends in Real Estate,” published in cooperation with PricewaterhouseCoopers LLP, The Urban Land Institute (ULI) notes that ratings for just about all U.S. markets declined markedly from its 2008 report. So, rather than call current market prospects “hot,” one could almost call them the “not-so-bad prospects for 2009.” ULI trend-watchers predict that the most promising locations are infill areas and center cities, with developers and investors continuing to steer away from outer suburbs and more auto-dependent areas. ULI advises, “Developers can’t miss securing project sites near light rail stops and train stations.” Investments in public transportation were in fact approved by an overwhelming margin in Seattle last month, where voters passed a $17.9 billion proposition to expand light rail and boost other transit— this was the largest of 22 such measures nationwide in 2008. California’s recently ratified SB 375 antisprawl bill calls for California Environmental Quality Act (CEQA) streamlining of residential or mixed-use projects, and transit priority projects. Coastal global ports of entry continued to offer the most promise as far as both ULI and YieldStar are concerned. Overall, ULI noted that in this tight economy, there is a “flight to quality,” and prospects dim for secondary and tertiary cities. “Active management will be the story for successful owners in 2009,” predicts Dan Fasulo, managing director at Real Capital Analytics. “The easy money is gone. You have to manage carefully.” Indeed, “generating more NOI out of the same rent—squeezing out every last dime of net income,” will be even more important in 2009, points out Tom Parsons, senior vice president and general manager of Opus Northwest, Seattle. The fact that more developments are incorporating sustainable features is helping control operating costs, Parsons adds. Portland and Seattle, for example, offer incentives, such as zoning considerations, for environmentally conscious communities. Fasulo predicts that 2009 will see a number of construction projects that do not get finished, as a few have already been halted across the U.S. For example, due to financing challenges, construction recently stopped on the Heritage at the Stoneleigh condominium, adjacent to the restored landmark Stoneleigh Hotel and Spa in Uptown Dallas. Ten floors of the 22-story tower have been completed. 16 December 2008 | Multi-Housing News | Producer of Multi-Housing World

Table of Contents for the Digital Edition of Multi-Housing News - December 2008

Multi-Housing News - December 2008
Contents
From the Editor
NMHC Notebook
Executive Insight
Finance: Acquisitions/Rehabs
Market Pulse
Development & Design: Student Housing
Market Report: 2009 Best Bets
Directory: Software Providers
Tech: Leasing Tools

Multi-Housing News - December 2008