PRESENTED BY: John Shaffer Brian Nelson (916) (916)

Transcription

1 Sacramento Multifamily Summary Apartment ADVISORY TEAM PRESENTED BY: John Shaffer Brian Nelson (916) (916)

2 Sacramento Multifamily Summary Points of Discussion MSA Market Fundamentals Transaction Volume and Pricing Trends New Construction Activity Rent Control in the Region Local Market Cycle Forecast of Key Indicators Apartment Advisory Team of Colliers Sacramento 2

3 Sacramento MSA Q3 Market Fundamentals YOY Change from Q to Q Overall Market Occupancy. 97.6% 97.0% Average Market Rent.. $1,241 $1,325 Total Net Absorption... (128) (955) Total Unit Completions Total M-F Permits Issued Units Under Construction. 1,965 2,786 Source: MPF (Includes Properties of 5+ units in Sacramento, Placer, El Dorado, and Yolo Counties) 3

4 Sacramento MSA Rental Rate Summary Dec Sep Source: MPF (Includes Properties of 5+ units in Sacramento, Placer, El Dorado, and Yolo Counties) 4

5 Sacramento MSA Occupancy Summary Average Market Rent Dec Sep Source: MPF (Includes Properties of 5+ Units in Sacramento, Placer, El Dorado, and Yolo Counties) 5

6 Sacramento MSA Employment Analysis 6.0% 4.0% Year-Over-Year Change 2.0% 0.0% Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13 Jan-14 Jan-15 Jan-16 Jan % -4.0% -6.0% MSA employment finally reached its prerecession level in October 2015, almost 5 years after bottoming in January 2011 with a loss of 110,000 jobs. -8.0% Source: California Employment Development Department (Sacramento-Roseville-Arden Arcade MSA) 6

7 Sacramento Multifamily Summary Points of Discussion MSA Market Fundamentals Transaction Volume and Pricing Trends New Construction Activity Rent Control in the Region Local Market Cycle Forecast of Key Indicators Apartment Advisory Team of Colliers Sacramento 7

8 Transaction Volume and Pricing Trends Sacramento MSA Sales Activity Comparison 149 Transactions 12,929 Units $1.417 B Avg. Price/Unit $109, Transactions 8,456 Units $1.229 B Avg. Price/Unit $145, Source: CoStar Sales Comparable for properties 10 units or greater in the 4-county region 8

9 Interest Rate Cap Rate Relationship 9

10 Sacramento Multifamily Summary Points of Discussion MSA Market Fundamentals Transaction Volume and Pricing Trends New Construction Activity Rent Control in the Region Local Market Cycle Forecast of Key Indicators Apartment Advisory Team of Colliers Sacramento 10

11 Sacramento MSA Multifamily Construction Q Total: 3,808 Units Source: CoStar, MPF Note: Totals above based on multifamily construction in four-county Sacramento region. 11

12 New Construction Activity Downtown Core Activity Downtown / Midtown The Ice Blocks D&S Development Downtown Commons (DoCo) The Bridge District The Railyards Sacramento Commons Others 12

13 New Construction Activity Properties Under Construction In Downtown / Midtown Source: CoStar and MPF 13

14 New Construction Activity: Downtown Core The Ice Blocks Heller Pacific is nearing completion on their repurposing efforts of the old Crystal Ice facility into a three-block eclectic mixed-use retail, commercial and residential development at 17 th & R. The first residential tenants recently moved into the 144- unit Ice Blocks apartments in July 2017, while the first retail tenants moved into their new space that same month. Other uses at this project include the repurposing of the 13,000 square-foot, former Orchard Supply Co. building, and the current construction of approximately 140,000 square feet of office and retail space slated for completion this Spring. 14

15 New Construction Activity: Downtown Core D&S Development Nearing completion of 700 K Apartments, the 137-unit affordable/market rate property they are building in partnership with CFY Development. The property is being constructed above 250k square feet of retail that will include stores, restaurants and a music club. Under construction on a 73 unit, market rate, apartment community on the existing parking lot at the southwest corner of Q and 15 Th Streets. 15

16 New Construction Activity: Downtown Core Downtown Commons The marquis component is the 17,600-seat Golden 1 Center, recently completed at a cost of $535 million, and is a joint venture between the Kings and the City of Sacramento. Recently opened at DoCo is the 16-story Kimpton Sawyer Hotel with 250 hotel rooms, 45 private residences, retail and office space, and over 20k square feet of meeting space. DoCo has entitlements for 1.5 million square feet of facilities, with Phase 1 to include the Sawyer Hotel as well as 128k of office and 300k of retail facilities. 16

17 New Construction Activity: Downtown Core The Bridge District At build-out this 188-acre mixed-use project, located along the Sacramento River, will include 1,700-2,800 residential units, MSF of commercial uses, and 215k square feet of retail. To date several single family communities have been completed as well as 539 apartment units in four separate communities. Also completed is the highly eclectic BARN, the signature development offering 8,000 square feet of event space. Still in the design phase is a 273 unit apartment property called Riveredge, hoping to break ground in

18 New Construction Activity: Downtown Core The Railyards This is a 244 acre master-planned, urban, mixed-use development being built by LDK Ventures. The property is planned for 6,000 to 10,000 residential units, million SF of office uses, 515k SF of retail, 1.2 million SF of medical campus, 1,100 hotel rooms and 780k SF of other flexible mixed-use facilities. Build-out is expected to take years. Plans were recently submitted for the first housing project at Railyards, a 277-unit, Class A property to be built by LDK Ventures with resort-style amenities. Construction could begin as early as August

19 Sacramento Multifamily Summary Points of Discussion MSA Market Fundamentals Transaction Volume and Pricing Trends New Construction Activity Rent Control in the Region Local Market Cycle Forecast of Key Indicators Apartment Advisory Team of Colliers Sacramento 19

20 Rent Control in the Region History of Rent Control First introduced in California as a response to an unintended consequence of Proposition 13, which caps property tax increases. Comes in many forms with the earliest being rent ceilings. The more current measures are rooted in rent stabilization policies. 20

21 Rent Control in the Region Unintended Consequences Decline in Supply Reduced Property Tax Revenues Promotes Housing Discrimination Primarily Benefits the Wealthy no Means testing Decline in Property Quality Unfairly Burdens Property Owners Financially 21

22 Rent Control in the Region Study Results A 2016 study completed by Beacon Economics on rent control in CA, which included some of their own proprietary analysis, concluded that rent control policies result in lower unit supply and higher rental rate growth in the overall market, consistent with many previous findings. Studies in Berkley and Santa Monica concluded that unit supplies between 1978 and 1990 declined by 14% and 8%, respectively, upon adoption of rent control measures. A study in New York concluded the loss of taxable property values as a result of rent control reached $4 billion by the late 1980 s. 22

23 Rent Control in the Region Financial Impact Colliers proprietary analysis concluded that the average Class A property in the City of Sacramento would suffer a deterioration in value by as much as $10.6M over 7 years if rent control measures tied rental growth to CPI. Analysis also concluded that the average Class B property in the City of Sacramento would suffer a deterioration in value by as much as $6.1M over 7 years, and the average Class C property value would decline by over $1.7M. The total value deterioration of multifamily properties in the City of Sacramento is estimated at $3 billion over a 7-year investment horizon. 23

24 Rent Control in the Region Sacramento Update Numerous articles have been published recently in the local press about the rent growth vs. affordability factor in Sacramento. Several activist groups responsible for pushing the rent control agenda in the Bay Area have now leased office space in Sacramento to push their agenda here. A vote is currently in progress at the State Capitol as we speak attempting to repeal the Costa Hawkins Act. 24

25 Rent Control in the Region Sacramento Update Community meetings are being held to organize the rent control effort locally. AAT Colliers Sacramento published Rent Control 101, a summary report on the rent control issue. Please the following for a copy: john.shaffer@colliers.com 25

26 Sacramento Multifamily Summary Points of Discussion MSA Market Fundamentals Transaction Volume and Pricing Trends New Construction Activity Rent Control in the Region Local Market Cycle Forecast of Key Indicators Apartment Advisory Team of Colliers Sacramento 26

27 Sacramento MSA Multifamily Cycle Market Statistics 2016 Rent Growth: 10.0% T-12 Rent Growth: 6.8% 5-YR Rent Growth: 6.7% Q Vacancy: 4.9% Q Vacancy: 2.4% Q Vacancy: 3.0% Sacramento Today Adjusted Sacramento Apartment Cycle Line (Supply constraints will result in an extended market cycle peak period.) 27

28 Sacramento MSA Sales Exceeding $20MM Price Source: CoStar 28

29 Sacramento Multifamily Summary Points of Discussion MSA Market Fundamentals Transaction Volume and Pricing Trends New Construction Activity Rent Control in the Region Local Market Cycle Forecast of Key Indicators Apartment Advisory Team of Colliers Sacramento 29

30 Sacramento MSA Forecast of Key Indicators Next 3 Months Next 12 Months Employment Growth N/A 1.35% New Apt. Unit Supply 200 2,197 Apt. Demand (absorption) Positive Negative Occupancy Rate 97.0% 96.7% Rent Growth 2.1% 6.5% Rent Concessions Insignificant Insignificant Apt. Sales Volume Strong Strong 30

31 Sacramento MSA Rental Rate Forecast FORECAST Rents forecast to increase 2.1% over the next 3 months, and increase 6.5% over the next 12 months. Dec Sep Q4 Q1 Q2 Q3 Source: MPF (Includes Properties of 5+ units in Sacramento, Placer, El Dorado, and Yolo Counties) 31

32 Sacramento MSA Occupancy Forecast Average Market Rent Occupancy forecast to increase 10 basis points over the next 3 months, but decline 20 basis points over the next 12 months. Dec Sep Q4 Q1 Q2 Q3 Source: MPF (Includes Properties of 5+ Units in Sacramento, Placer, El Dorado, and Yolo Counties) 32

33 Sacramento MSA Employment Forecast (Actual) Source: The California Economic Forecast 33

34 Apartment Advisory Team of Colliers Sacramento Market Intelligence Campaign Sale Transactions General Apartment Fundamentals Update Properties Available for Sale Quarterly Report Global, National and Local Apartment Highlights Forecast of Various Apartment Indicators 34

35 Brian Nelson Senior VP DIR (916) John Shaffer Multifamily Specialist DIR (916) Bruce Hester Senior VP DIR (916) Colliers International 301 University Avenue Suite 100 Sacramento, CA (916) Apartment ADVISORY TEAM