“You miss 100 percent of the shots you never take, and if you think it’s expensive to hire a professional to do the job, wait until you hire an amateur “ . ARE YOU READY TO SELL OR PURCHASE YOUR LAND OR COMMERCIAL BUILDING IN PHOENIX, SCOTTSDALE, MARICOPA COUNTY AND PINAL COUNTY, ARIZONA, CLICK HERE AND PLEASE CALL ME. 520-975-5207 or email me walterunger@ccim.net
Here are a few of the top worries for today’s multifamily investors. Bendix Anderson | Sep 26, 2017
Nothing good lasts forever. Apartment sector experts are scanning the horizon for problems that could hurt their properties, even though apartment rents are still rising and the percentage of vacant apartments is still relatively low.
Here are a few of the top worries for today’s multifamily investors:
Wave of new luxury apartments to open this year
Luxury apartment building owners worry about competition from new class-A developments.
“The delivery volume is the biggest concern in the class-A property niche now,” says Greg Willett, chief economist for RealPage Inc., a provider of software and analytics to the real estate industry. Developers plan to open more than 100,000 new apartments per quarter starting in the third quarter and continuing through the middle of 2018. That’s up from the roughly 80,000 new units per quarter that opened over the last year.
“A huge wave of new supply brought on-stream during the seasonally slow leasing period that is seen in the fourth quarter and the first quarter of 2018 could do some real damage to overall occupancy,” says Willett.
Even though there is strong demand for apartments overall, the new apartments now opening are designed to appeal to a limited number of high-earning residents.
The vast majority of the apartments now under construction (87 percent) will require prospective residents to earn at least $75,000 a year, according to research firm CoStar (using the leasing standards set by many institutional property owners). More than half of the units (58 percent) will require prospective residents to earn at least $100,000 a year.
“We are seeing vacancies rise at the top end of the market and concessions increase,” says Michael Cohen, director of advisory services for CoStar Portfolio Strategy. Eventually these new apartment are likely to fill with renters. “We just think it’s going to take time.”
Slower leasing velocity may hurt the profitability of some new projects. “There may be projects that will not make their pro-forma estimates,” says Cohen. However, the new apartments are high-quality and in desirable locations. They are likely to succeed eventually. The developers “are not worried about being able to pay their loans.”
Lenders have been fairly disciplined during this real estate cycle. Recent construction loans have featured relatively low leverage, which limits the worst-case scenarios that apartment development will have to worry about.
“The growth of new multifamily supply should peak in 2017, despite construction delays pushing some deliveries into next year,” said Jeffery Daniels, senior vice president and national director with investment specialist IPA Multifamily. “However, overall vacancy will remain tight as positive demand drivers maintain absorption.”
Class-C apartments face affordability challenges
Less expensive apartments face a different sort of challenge: rents are about as high as they can get for class-C apartments without some corresponding boost to the income of lower-income residents.
But more than half of renter households earn less than $50,000 a year. “More educated renters saw their wages rise in this cycle, but wage are flat for working [people] without college degrees,” says Cohen.
“It will be tough to push rents moving forward, given so many households who live in lower-tier properties already spending about as much as they can afford to pay for housing costs,” says Willett.
Developers struggle to find workers
Developers are also struggling to find construction workers, especially now that a string of hurricanes have created a huge need for construction labor. “There is a labor shortage in the construction sector,” says Cohen. “There are 11 percent fewer construction workers nationally compared to the last real estate cycle.”
During the housing crash, many workers left the construction business and have not returned. Some retired. Others who were recent immigrants may have returned to their home countries.
After Hurricane Harvey and Hurricane Irma, even more workers are needed to complete urgent rebuilding projects. With fewer workers available, developers are forced to pay more to attract workers to their jobs. Wages for construction workers for residential real estate projects rose 25 percent over the past five years. That’s nearly twice the rate of wage increases for workers overall, according to analysis by CoStar.
Developers that lose bidding battles to attract workers may have delays in their construction projects, says Cohen.
A shock to the system
Apartment sector investors also worry about unforeseen events that could change their business or hurt demand for apartments.
Near the top of the list of those worries is that Congress could pass a tax reform package that changes the laws that govern how apartment deals are treated in the tax code. “The fates of rules on carried interest and the 1031 exchange program perhaps are of most concern,” says Willett.
SEE IT ALL: http://www.nreionline.com/multifamily/four-top-concerns-today-s-apartment-developers
ARE YOU READY TO SELL OR PURCHASE YOUR LAND OR COMMERCIAL BUILDING IN PHOENIX, SCOTTSDALE, MARICOPA COUNTY AND PINAL COUNTY, ARIZONA, CLICK HERE AND PLEASE CALL ME. 520-975-5207 or email me walterunger@ccim.net
FROM ME:
Phoenix Commercial Real Estate and Investment Real Estate: Investors and Owner / Users need to really know the market today before making a move in owner user Commercial Properties, Investment Properties and land in Phoenix / Maricopa County, Pinal County / Arizona, as the market has a lot of moving parts today. What is going on socio-economically, what is going on demographically, what is going on with location, with competing businesses, with public policy in general — all of these things affect the quality of selling or purchasing your Commercial Properties, Commercial Investment Properties and Commercial and large tracts of Residential Land Therefore, you need a broker, a CCIM (Certified Commercial Investment Member) who is a recognized expert in the commercial and investment real estate industry and who understands Commercial Properties and Investment Properties. I am marketing my listings on Costar, Loop-net CCIM, Kasten Long Commercial Group. I also sold hundreds millions of dollars’ worth of Investment Properties / Owner User Properties in Retail, Office Industrial, Multi-family and Land in Arizona and therefore I am working with brokers, Investors and Developers. I am also a CCIM and through this origination ( www.ccim.com ) I have access to marketing not only in the United States, but also internationalClick here to find out what is a CCIM: https://en.wikipedia.org/wiki/CCIM
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Timeline of Arizona from 900 BC – 2017
ARE YOU READY TO SELL OR PURCHASE YOUR LAND OR COMMERCIAL BUILDING IN PHOENIX, SCOTTSDALE, MARICOPA COUNTY AND PINAL COUNTY, ARIZONA, CLICK HERE AND PLEASE CALL ME. 520-975-5207 or email me walterunger@ccim.net
Apartments: Construction, Planned, Prospective
Interactive Map :: 10+ Unit Apartments For Sale Greater Phoenix AZ
WEEKLY APARTMENT CLOSING UPDATE THROUGH September 22, 2017 / Phoenix Arizona Metro.
WEEKLY APARTMENT CLOSING UPDATE THROUGH September 15, 2017 / Phoenix Arizona Metro.
WEEKLY APARTMENT CLOSING UPDATE THROUGH September 8, 2017 / Phoenix Arizona Metro.
WEEKLY APARTMENT CLOSING UPDATE THROUGH September 1, 2017 / Phoenix Arizona Metro.
WHY PHOENIX? AMAZING!!! POPULATION IN 1950 – 350 K PEOPLE; “NOW 5 MIL”. – “5TH. BIGGEST CITY IN USA”
DOT – LOOP 202 / SOUTH MOUNTAIN FREEWAY / PHOENIX AZ – UNDER CONSTRUCTION
ARIZONA FACTS – YEAR 1848 TO 2013
- DEMOGRAPHIC FACTS ABOUT MARICOPA COUNTY:
- The average age of the population is 34 years old.
- The health cost index score in this area is 102.1. (100 = national average)
- Here are some of the distributions of commute times for the area: <15 min (22.7%), 15-29 min (36.8%), 30-44 min (25.1%), 45-59 min (8.6%), >60 min (6.8%).
PHOENIX PROJECTED AS NUMBER ONE US HOUSING MARKET FOR 2017
LIST OF ECONOMIC DEVELOPMENT PROJECTS IN PINAL COUNTY, REVISED 2-14-17
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2016 Official Arizona Visitors Guide
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