Apartment Market Survey Summary May 2011 Albuquerque & Santa Fe, New Mexico

Transcription

1 Apartment Market Survey Summary May 2011 Albuquerque & Santa Fe, New Mexico CB Richard Ellis Multi-Housing Group 6100 Uptown Blvd. NE, Suite 300 Albuquerque, NM

2 TABLE OF CONTENTS PURPOSE, METHODOLOGY & ACKNOWLEDGEMENT... 3 TEAM PROFILE... 4 ALBUQUERQUE OVERVIEW... 4 ALBUQUERQUE PROPERTY STATISTICS... 5 ALBUQUERQUE MARKET SURVEY - SUMMARY... 6 ALBUQUERQUE MLS - SUMMARY... 7 SYNOPSIS OF SURVEY FINDINGS - ALBUQUERQUE... 8 SANTA FE OVERVIEW... 9 SANTA FE PROPERTY STATISTICS - SUMMARY SANTA FE MARKET SURVEY SUMMARY SANTA FE MLS SUMMARY SYNOPSIS OF SURVEY FINDINGS - SANTA FE LEGAL DISCLAIMER... 13

3 3 PURPOSE, METHODOLOGY & ACKNOWLEDGEMENT Purpose The purpose of the Albuquerque/Santa Fe Apartment Market Survey is to satisfy demand from property managers, investors, lenders, appraisers and other real estate professionals for comprehensive information about Albuquerque and Santa Fe rents and occupancy. We are committed to making this data as widely available as possible. Methodology CBRE identified all Albuquerque properties of 90+ units and has been gradually adding smaller properties. This survey sample includes substantially all of Albuquerque s larger properties with the exception of properties in lease-up with less than 60% occupancy and those serving certain non-representative market segments. The May 2011 Albuquerque market survey population includes 182 properties totaling 38,345 units. Of these, 138 totaling 30,853 units are market rate and 44 totaling 7,492 units are affordable. The May 2011 Santa Fe market survey encompasses 20 Santa Fe properties totaling 3,224 units. This represents 100% of all properties of more than 80 units and some smaller properties. The Santa Fe population is composed of 10 market rate properties totaling 1,820 units and 10 affordable properties totaling 1,404 units. The objective of the survey is to determine weighted average occupancy and rent for individual unit types and for the overall market. The survey reports data by Greater Albuquerque Association of Realtors MLS areas, which are generally homogeneous residential neighborhoods. This facilitates comparison of multifamily data with single family residential data. The CBRE market report bundles market rate and income restricted properties as well as properties with varying degrees of utilities paid by either the tenant or the property. The size of the survey reduces the impact of these differences. In the case of both Albuquerque and Santa Fe, income restricted property rents at 60% of median income are often close to market rent levels. Additionally, the properties that include utilities in the rent generally have lower rent than those that do not, which is counter intuitive, but reflects their catering to a lower income clientele. We consider concessions as only those specials that affect monthly rent, and do not consider move-in specials as concessions. Concessions that result in reduced rent for the entire term of the lease are treated as rent reductions and are also counted as concessions. We ask properties on a yes or no basis if they offer rent concessions and report the response as a percent of all responders. Concessions come and go and are difficult to accurately quantify, but we do believe that market trends in the percentage of properties offering some form of concession give an indication of the market s health. Market Occupancy and Rent are Reported by s: average figures for occupancy and rent more accurately reflect market performance than do arithmetic averages. Total market and individual unit occupancy and rent are reported as weighted averages. Please note that reported rents are asking rents and should be adjusted to take into account loss-to-lease and concessions. Vacant units are physically vacant or empty units and would include a vacant but pre-leased unit.

4 4 Survey Timing CBRE produces the survey three times annually: In January to correspond to the winter occupancy low point, in May to correspond to the usual spring rise in occupancy and in September to correspond to the end of summer occupancy peak. Acknowledgements We wish to thank the property owners, property management firms and their senior management, regional managers and on-site staff who have made this survey possible by providing rental rates and vacancy data. We will continue to seek recommendations from them for adjustments or additions to future surveys that will make it an even more useful management tool. Custom Reports The CBRE market survey summary contains basic information on the overall Albuquerque and Santa Fe apartment markets and on the MLS districts making up the markets. CBRE also has the ability to prepare more detailed custom reports containing in-depth information on specific market segments or areas and will consider doing so upon request. CBRE MULTI-HOUSING GROUP TEAM PROFILE The CB Richard Ellis national multi-housing platform features market-leading professionals in most major markets across the country. The national team s constant exchange of market intelligence provides a foundation for the highest level of service to our local and national clients. The CB Richard Ellis New Mexico Multi-Housing Group is committed to providing the most accurate and comprehensive information possible about our local apartment markets. The team is composed of the following individuals: David Eagle Billy Eagle Senior Vice President Associate T T F F david.eagle@cbre.com billy.eagle@cbre.com ALBUQUERQUE OVERVIEW Albuquerque is a unique combination of the traditional and the highly contemporary. It is a spectacular blend of diverse cultures, cuisines, people and landscapes. It is a city with a rich history with evidence of inhabitation dating as far back as 25,000 years. Albuquerque has been called the most culturally diverse city in America with its balance of a prehistoric past and a high-tech present. The city of Albuquerque, covering roughly 181 square miles, is located on a high, semi-arid plateau at an altitude of 5,311 feet. The Rio Grande River divides the city into east and west sides, and it is bisected by two major interstate freeways, the I-25 (north/south) and the I-40 (east/west). Historic Route 66 also runs through Albuquerque.

5 5 Located at the approximate geographic center of New Mexico, Albuquerque serves as the state s major commercial center. As the state s largest urban area, Albuquerque plays a central role in New Mexico s economy, serving as a business, trade, finance, industry, and government center. Albuquerque s moderate climates, breathtaking scenery, well-developed transportation network and overall quality of life have all contributed to the city s continued growth and prosperity. According to 2011 estimates, Albuquerque MSA population is 867,700, up from 766,200 in It is expected to reach 905,200 by The east side of the City of Albuquerque is essentially built out, thus much of MSA growth has been on the west side, including the far west side bedroom community of Rio Rancho. The Albuquerque metro area accounts for nearly half of all the economic activity in New Mexico. ALBUQUERQUE PROPERTY STATISTICS - SUMMARY Number of Properties Reporting 182 Total Reporting 38,345 Property Size 211 Occupancy Rate 95.25% Smallest Property Largest Property Earliest Year Built 1953 Latest Year Built 2009 Year Built 1983

6 6 ALBUQUERQUE MARKET SURVEY SUMMARY Unit Type Total # Percent Mix # Vacant Occupancy Total SQ. FT. SQ. FT. Rent Rent Per SQ. FT. Efficiency 2, % % 1,230, $496 $1.20 1/1 15, % % 10,689, $649 $0.97 2/1 5, % % 4,588, $703 $0.83 2/ % % 615, $750 $0.86 2/ % % 31, $650 $0.84 2/2 10, % % 10,096,475 1,005 $847 $0.84 2/ % % 145,557 1,255 $1,055 $0.84 3/ % % 58,042 1,095 $871 $0.80 3/ % % 287,984 1,059 $818 $0.77 3/2 2, % % 3,047,857 1,180 $942 $0.80 3/ % % 61,864 1,406 $845 $0.60 3/ % % 53,204 1,330 $1,150 $0.86 4/ % % 17,528 1,252 $783 $0.63 4/ % % 86,610 1,140 $863 $0.76 TOTALS 38, % 1, % 31,010, $722 $0.89 *Any variances in totals are minor and are a result of weighting or rounding.

7 7 ALBUQUERQUE MLS SUMMARY MLS Area Total # # Vacant Occupancy Total Rent Rent Per SQFT % 223,736 1,036 $1,079 $ , % 4,967, $843 $ % 478,036 1,112 $1,164 $ , % 4,212, $692 $ , % 690, $656 $ , % 3,314, $665 $ % 770, $754 $ , % 4,239, $662 $ % 349, $624 $ % 218, $705 $ , % 2,110, $610 $ , % 569, $685 $ % 198, $641 $ % 361, $655 $ % 241, $634 $ % 158, $670 $ % 327, $831 $ , % 1,000, $821 $ , % 1,865, $684 $ % 237, $685 $ , % 2,916, $785 $ % 603, $754 $ , % 933, $784 $0.87 *TOTALS 38,345 1, % 31,010, $722 $0.89

8 8 SYNOPSIS OF SURVEY FINDINGS ALBUQUERQUE The Albuquerque apartment market continues in May to maintain the momentum seen in the January survey. Albuquerque consistently ranks among the strongest apartment markets in the United States in spite of historically high unemployment. May s seasonally adjusted unemployment rate in the Albuquerque MSA was 8.0%, down from 8.6% a year ago. This is definitely a move in the right direction, but still substantially higher than mid-2008 unemployment of sub-3.50%. The consensus among local economists is that the Albuquerque economy is continuing to slowly improve, but not necessarily for the job seeker. Nonfarm payroll employment for April was down 6,300 jobs or 1.7% over the year. The Albuquerque MSA has now reported negative job growth for 31 consecutive months. In spite of the employment picture, Albuquerque s apartment market continues to perform admirably. The May 2011 apartment market survey indicates weighted average market occupancy of 95.25%, an increase of 0.91% over May Year-over-year average rent improved from $697 to $722 (3.59%). The May survey includes results for 138 market-rate and 44 affordable properties. size of the market rate properties was 224 units, and the affordable properties average 170 units. The Albuquerque apartment market units surveyed are split 80/20 between market-rate and affordable units. Occupancy for the market-rate and affordable properties was virtually identical at 95.23% and 95.29% respectively. Market-rate average rent was $731, and affordable rent averaged $685 - a 6.72% advantage to the market-rate properties. This difference is a bit deceptive since most of the affordable properties have units limited to tenants in the 30% to 60% of median income brackets. This brings down the overall affordable average rent. Affordable properties at 60% of median income generally have rents at or close to market-rate rents. The percentage of surveyed properties offering some form of concessions decreased from 36% to 27% between January and May In May 2010, 52% of surveyed properties offered some form of concession. Concessions are tough to quantify since properties typically offer them for limited time periods on units with temporary exposure or tenant retention issues. Concessions reported were typically a week or two on a 12-month lease. We do not consider move-in specials as concessions when they do not involve reduced rent. 24% Albuquerque Occupancy % % % % % Albuquerque Concessions 73% Yes No 2% 4% 2% 68% 27%

9 9 The favorable concession trend contrasts with the decrease in properties with occupancy above 95%. Surveyed properties at 95% or greater occupancy declined between January and May from 75% to 68%. Properties operating above 90% occupancy declined a bit between January and May 2011 from 96% to 92%, compared with 91% in May Properties operating at 85% or better declined between May 2010 and May from 98% to 94%, with part of the decline due to down units attributable to frozen pipes that occurred during our short stretch of unusually cold mid-february weather. The bottom line is that Albuquerque continues to be among the country s strongest and most stable apartment markets. Developable land is scarce, and delivery of future new units is unlikely to exceed demand. Eventual improvement in the local economy and job market will put increased pressure on occupancy and rents. SANTA FE OVERVIEW Santa Fe is located about 50 miles north of Albuquerque. It is the New Mexico state capitol and the oldest capitol city in America. Santa Fe is the fourth largest city in New Mexico with a population of about 72,000. Santa Fe has historically been an attractive apartment market due to relatively high single-family residential prices coupled with slow supply growth largely due to tight governmental controls on new development. Santa Fe has historically attracted a large cohort of construction and leisure & hospitality industry workers who typically are renters rather than owners. The local economy is normally driven by tourism and the arts, the construction industry, public sector activity and a diverse business community. Santa Fe is considered the nation s second largest arts market, but has suffered through a two year economic slump that particularly affected the construction, information, and leisure and hospitality sectors. When the economy and housing markets turned down three years ago many workers simply left town. As a result, the apartment market went into an atypical swoon with market occupancy hitting bottom in May 2009 at 83.34%. This unprecedented decline was from 94.20% in September The Santa Fe economy is showing signs of improvement after its 2009 decline. The seasonally adjusted unemployment rate was 6.2% in April 2011, an improvement from 7.0% in April Over the year, Santa Fe employment increased by 900 jobs or 1.5%, the seventh straight month of job gains following 26-month string of job losses. The education and health services, and leisure and hospitality sectors posted 6% or better gains. Construction employment crashed in 2009 and was flat in April year-over-year. Construction related workers historically have been solid contributors to Santa Fe apartment occupancy, particularly in certain areas of town, and construction activity will have to significantly improve for Santa Fe to return to more traditional 93% to 95% occupancy levels. Tourism activity is picking up with leisure and hospitality, and retail trade adding about 600 and 200 jobs respectively over the year. Santa Fe has a special ambience with worldwide appeal and job growth in these two sectors indicates that the tourist market is coming back. Construction will continue to be slow until lending returns to more normal levels. A more stable job market seems to be underlying increases in apartment occupancy. As with Albuquerque, there is no significant new construction of apartment units in sight.

10 10 SANTA FE PROPERTY STATISTICS - SUMMARY Number of Properties Reporting 20 Total Reporting 3,224 Property Size 161 Occupancy Rate 91.94% Smallest Property Largest Property Earliest Year Built 1973 Latest Year Built 2008 Year Built 1992

11 11 SANTA FE APARTMENT MARKET SURVEY SUMMARY Unit Type Total # Percent Mix # Vacant Occupancy Total Rent Rent Per Efficiency % % 189, $552 $1.09 1/ % % 531, $712 $1.11 2/ % % 671, $771 $0.95 2/ % % 640, $862 $0.91 3/ % % 36, $843 $0.96 3/ % % 476,582 1,106 $950 $0.86 4/ % % 56,161 1,248 $999 $0.80 TOTALS 3, % % 2,601, $778 $0.96 *Any variances in totals are minor and are a result of weighting or rounding. SANTA FE MLS SUMMARY MLS Area Total # # Vacant Occupancy Total Rent Rent Per % 158, $1,008 $ % 406, $858 $1.07 4S 1, % 822, $761 $ , % 1,214, $737 $0.88 *TOTALS 3, % 2,601, $778 $0.96 *Any variances in totals are minor and are a result of weighting or rounding.

12 12 SYNOPSIS OF SURVEY FINDINGS SANTA FE The Santa Fe January market survey is composed of 10 market-rate and 10 affordable communities totaling 3,224 units. Market rate and affordable properties were 55.56% and 44.44% respectively of total units surveyed. May market occupancy of 91.94% was down from 92.60% in January and from 93.30% in September May 2010 market occupancy was 92.50%. The high percentage of affordable units is a result of a large number of service-sector jobs as well as public agency subsidized construction financing over the last decade that seeks to provide affordable housing in Santa Fe s high housing cost market. May average monthly asking rent of $778 is down a bit from January s average of $785 and up 2.50% from May 2010 average rent of $759. Santa Fe average rents are gradually moving toward their high point of $800 in September The Santa Fe apartment market will strengthen further when the national and local economies improve, and in the interim the apartment market should continue to perform at current levels. Market-rate average occupancy and monthly rent were 90.60% and $784. Affordable average occupancy and rent were 93.66% and $769. The Santa Fe rent differential between market-rate and affordable properties narrowed to 1.91% down from 5.55% in January. This narrowing rent differential should be viewed cautiously because of the small sample size and the impact of short-term rent movements at a handful of large properties. Regardless of overall occupancy figures, there are a number of Santa Fe market rate and affordable properties operating well above 95% occupancy. We believe that the Santa Fe survey rent and occupancy figures are accurate, but we issue the following caveats with each survey edition: The Santa Fe May 2011apartment market survey is composed of a relatively small sample of 3,224 units. The market-rate property population includes some large properties, and the data for an individual market report can be skewed by a short-term increase or decrease in occupancy or an unusually aggressive short-term pricing program. The reported rents are asking rents and they may be overstated for an individual property by a particularly aggressive concession program in place on the date the survey data is collected. This sort of anomaly would be immaterial with a larger market survey population. As previously mentioned, some of the individual affordable properties operate under a number of different programs that can result in a wide range of asking rents for a particular unit type. We average these individual unit type rents without regard to the number at each price point. Anyone analyzing a single property is advised to conduct their own detailed survey of direct competitors. The May 2011 survey showed 55% of Santa Fe properties surveyed reporting some form of rent concession, which is virtually identical to the 56% figure reported in January and a nice improvement from the 65% reported in May Typical concessions continue to range from two to four weeks on a nine- to 12-month lease. Sixty five percent of Santa Fe properties reporting in January had occupancy of 90% or better, a decline from January s 71%, and a more worrisome decline from 75% in May Eighty eight percent of May surveyed properties reported occupancy of 85% or better, compared with 88% in January and 95% in May It appears that the Santa Fe market is in a short term lull in its march toward historical rent and occupancy levels, but there doesn t appear to be any economic reason why this shouldn t be considered a temporary hiatus rather than a long term trend.

13 13 Santa Fe Occupancy % % Santa Fe Concessions Yes No 20% 15% % % % 45% 15% 0% 50% 55% The Santa Fe apartment market on average is performing at a satisfactory level given the state of the local construction industry. Particularly with the market rate sector, there is little to no new product in the development pipeline so the overall market appears poised for improved performance as the economy improves. Timing is everything, and the prognosis appears to be a return to more typical occupancy and rent levels over the next three years, rather than over the next 12 to 18 months. Santa Fe s cachet as a major tourist and art destination has not changed and will hold it in good stead as the economy recovers. On the supply side, Santa Fe s local government can be expected to continue to make new development difficult, but not impossible. Financing for affordable property development will continue to be available through various tax credit or subsidized programs. Market-rate apartment construction is unlikely to loosen up in the near term due to Santa Fe s relatively low rent and near-term occupancy challenges. This bodes well for existing product. Legal Disclaimer: 2011 CB Richard Ellis, Inc. CB Richard Ellis statistics contained herein may represent a different data set than that used to generate National Vacancy and Availability Index statistics published by CB Richard Ellis Corporate Communications Department or CB Richard Ellis research and econometric forecasting unit, CBRE Econometric Advisors. Information herein has been obtained from sources believed reliable. While we do not doubt its accuracy, we have not verified it and make no guarantee, warranty or representation about it. It is your responsibility to independently confirm its accuracy and completeness. Any projections, opinions, assumptions or estimates used are for example only and do not represent the current or future performance of the market. This information is designed exclusively for use by CB Richard Ellis clients, and cannot be reproduced without prior written permission of CB Richard Ellis.