VOL. 20 SPRING 2014 THE Apartment Report BOOM! Craig McConachie, C&R Real Estate Services, Co. Apartment Report Committee Amidst a significant building boom, low vacancies and increasing rents, there are some early signs that supply and demand will soon equalize, and the market will be more in balance by the end of next year. Overall vacancies have inched up in most areas, and the inclusion of new units in our survey has caused average rent rates to increase over 5% in the past six months. Operating expenses for all unit types have increased a modest 2.2% on an annual basis, as landlords continue to realize solid returns on their investments. Market demand is high for the multifamily sector, and supply is extremely low. The number of closed transactions in the Metro area decreased from 87 in the fourth quarter of 2013, to 56 in the first quarter of 2014, reflecting a 36% decline in sales. Portland/Vancouver VACANCY: The Portland/Vancouver vacancy factor increased, and currently stands at 3.46%. This is only slightly higher than the 3.11% rate reported in our Fall report. The St. John s area is showing surprising strength reporting a 2.3% vacancy factor. This is the lowest in all of the surveyed areas. Tigard, NW Portland, Lake Oswego and Aloha all have vacancy factors over 4%. All unit types are less than 4% vacant with the exception of a 4.06% rate for 3 bdrm/2 bath units. Two bedroom, one bath units have the best occupancy of all unit types, with average vacancy of 2.7%. RENT RATES: Overall rents in the Metro area have continued to increase at an annual rate of over 11%. In the past six months Northwest Portland and Tigard have experienced an 11% increase, with the St. John s area showing a 25% increase. Average rent per sq. ft. for all areas has increased to $1.16. The downtown core continues to have the highest rents at $1.93 p.s.f. Outer NE Portland and Troutdale/Fairview have the lowest rates, averaging $.88 p.s.f. Oregon City was one of the few areas that had a slight decrease in rent. MARKET CONDITIONS: Only 7% of all properties are offering rental incentives. The average number of days that a unit will stay vacant for the entire area is 35, with Inner SE Portland and St. Johns experiencing the fastest turnover rate of only days. Fifty two percent of all professionally managed properties in the Portland/Vancouver area are passing through water and sewer costs to their residents. Other Areas The Bend/Redmond area continues its strong performance, with a vacancy rate just over 1%, as Deschutes County, is once again, the fastest growing county in the Western U.S. Eugene/Springfield is stable, with a 4% vacancy, and average rents of $1.02 p.s.f. The Salem market has experienced a significant increase in vacancy from 4.03% to 6.45%, and landlords are offering incentives at 23% of the properties. Salem landlords have been increasing tenant paid water and sewer bill-backs, with over 45% of tenants being billed. The Bend and Eugene areas are reporting 33% tenant paid water and sewer. Operating Expenses This issue includes our annual survey of apartment operating expenses. The numbers are derived from 2013 year end operating statements at 8 stabilized properties, representing 13,011 units throughout the Portland Metro area. We have expanded and modified our property types this year for Multnomah County, and now have three age groups for both garden style and urban style projects. This will better reflect the recent building activity and allow for more relevant comparisons. Median expenses have increased for all property types by a modest 2.2 % over the past year, from $4,251, to $4,346. Newer garden style apartments in Clackamas County have the highest 1 expenses at $5,009, while older urban style units in Multnomah County have the lowest expenses of $4,037. Property taxes average $870 ($1.07 psf ), insurance cost averages $165 ($.22 psf ) and water and sewer expense averages $550 per unit ($.76 psf ). Our Contributors Patrick and Mark Barry have once again contributed an excellent article on the apartment construction market. The current building boom and the market s supply and demand are skillfully analyzed in their detailed article. (continued on page 2) 1 2 3 4 OREGON SURVEYED AREAS 1. Portland & Vancouver 2. Salem & Vicinity 3. Eugene & Springfield 4. Bend & Redmond SURVEY SAYS! Vacancy Inching Up Rent Growth Continues Construction Booming Expenses Stable TABLE OF CONTENTS PORTLAND METRO MAP...................... 2 TENANT PAID UTILITIES...................... 2 AVERAGE RENT PER SQUARE FOOT AVERAGE MARKET VACANCY RATE AVERAGE NO. OF DAY VACANT................ 3 SURVEY RESULTS........................... 4 & 5 TREND REPORT............................... 6 APARTMENT VALUES.......................... 6 ECONOMIC UPDATE........................... 7 INCENTIVES................................... 7 APARTMENT CONSTRUCTION UPDATE... 8- OPERATING EXPENSES....................... 11
portland metro area multnomah county 5 DOWNTOWN PORTLAND 1 NW PORTLAND 13 INNER & CENTRAL SE (PORTLAND) 17 INNER & CENTRAL NE (PORTLAND) 18 NORTH PORTLAND ST. JOHNS 6 SW PORTLAND 14 OUTER SE (PORTLAND) 16 OUTER NE (PORTLAND) 15 TROUTDALE FAIRVIEW WOOD VILLAGE GRESHAM clackamas county 12 CLACKAMAS 8 LAKE OSWEGO WEST LINN 11 MILWAUKIE OREGON CITY GLADSTONE 9 WILSONVILLE CANBY washington county 3 ALOHA 4 BEAVERTON 2 HILLSBORO NORTH OF HWY 26 7 TIGARD TUALATIN SHERWOOD clark county 19 WEST VANCOUVER 20 EAST VANCOUVER (continued from page 1) TENANT PAID UTILITIES MAP AREA WATER HEAT GARBAGE NW PORTLAND HILLSBORO N OF HWY 26 ALOHA BEAVERTON DOWNTOWN PORTLAND SW PORTLAND TIGARD TUALATIN SHERWOOD LAKE OSWEGO WEST LINN WILSONVILLE CANBY OREGON CITY GLADSTONE MILWAUKIE CLACKAMAS INNER & CENTRAL SE PTLD OUTER SE PORTLAND TROUTDALE FAIRVIEW WOOD VILLAGE GRESHAM OUTER NE PORTLAND INNER & CENTRAL NE PTLD NORTH PTLD ST. JOHNS WEST VANCOUVER EAST VANCOUVER SALEM VICINITY EUGENE SPRINGFIELD BEND REDMOND 84.3% 67.1% 66.7% 72% 53.9% 76.5% 72.2% 58.8% 52.9% 5 31.2% 19.6% 22.6% 5 77.8% 44.5% 32.3% 33.3% 65% 66.7% 64.1% 6 66.7% 41.3% 89.1% 84.6% 59.4% 77.4% 92% 94.1% 96.3% 95.8% 97.4% 83.3% 96% 97.2% 95.8% 12.5% 60.3% 5 74.5% 44% 43.6% 47.1% 51.9% 35.3% 29.4% 35% 33.3% 17.4% 14.9% 16% 28.2% 15.2% 16.1% 8.3% 47.2% 40.3% 32.3% 61.1% BARRY REPORTS: There is a current shortage of 4,000 units 6,500 units currently under construction across 56 projects 75 projects with 6,850 new units completed in the last 18 months 14,000 proposed units across 125 projects Longer lease up periods Over 5 of the units under construction are either close-in east Portland, or suburban west side. Over 5 of the proposed units are close-in west Portland or suburban west. There is a concern that the income levels needed by tenants to afford these higher priced units, may not be supported by the Portland economy. As absorption slows and concessions increase, Barry expects vacancies to increase to 5.25% by the end of 2015. We are in the midst of a broad-based and healthy recovery, explains Amy Vander Vliet from the Oregon Employment Department. Unemployment has dropped to 6.4%, which is the lowest it s been since the summer of 2008. This has been helped by job strength in manufacturing, business services and the housing market. Amy believes that the jobs recovery is complete and notes that in good times and in bad, people want to live here. This survey represents a total of 63,161 units from 890 properties. All of the articles have been reprinted without editing the content, in order to present unbiased opinions. We d like to thank all of the management companies and property owners who have submitted information. Their participation is critical in insuring the accuracy of our data and the continued success of this report. 2
East Vancouver $2.00 $1.90 $1.80 $1.70 $1.60 $1.50 $1.40 $1.30 $1.20 $1. $1.00 $0.90 $0.80 $0.70 11.. 9. 8. 7. 6. 5. 4. 3. 2. 1. 0. average rent per square foot $ 1.77 Northwest Portland Hillsboro N of Hwy 26 Aloha Beaverton 1.12 1.08 1.06 1.93 Downtown Portland SW Portland 1.41 Tigard Tualatin Sherwood 1.09 average market vacancy rate % NW Portland 4.3 Hillsboro N of Hwy 26 3.1 Aloha 4.1 Beaverton 3.0 Downtown Portland 3.5 SW Portland 2.8 Tigard Tualatin Sherwood 4.4 Lake Oswego West Linn 1.20 Lake Oswego West Linn 4.0 Wilsonville Canby 1.05 Wilsonville Canby Oregon City Gladstone.94 Oregon City Gladstone 3.7 3.8 Milwaukie 1.01 Milwaukie 2.5 Clackamas.97 Clackamas 2.7 Inner & Central SE (Ptld) Inner & Central SE (Ptld) 1.26 3.9 Outer SE (Ptld).98 Outer SE (Ptld) 3.7 Troutdale Fairview Wood Village Gresham.88 Troutdale Fairview Wood Village Gresham Outer NE (Ptld).87 Outer NE (Ptld) 2.3 2.4 1 2 3 4 5 6 7 8 9 11 12 13 14 15 16 17 18 19 20 Inner & Central NE (Ptld) Inner & Central NE (Ptld) 1.29 2.4 North Portland St. Johns 1.34 N Portland St. Johns 2.3 West Vancouver.93 West Vancouver 3.3.97 East Vancouver 3.0 Salem.98 Salem 6.5 Eugene Springfield 1.02 Eugene Springfield 4.0 Bend Redmond.75 Bend Redmond 1.1 other areas 120 1 0 90 80 70 60 50 40 30 20 0 NW Portland average number of days vacant portland/vancouver Hillsboro N of Hwy 26 68 77 Aloha 65 60 Beaverton Downtown Portland SW Portland 36 31 32 30 31 27 23 Tigard Tualatin Sherwood 37 22 Lake Oswego West Linn Wilsonville Canby 64 58 Oregon City Gladstone 46 47 37 34 Milwaukie 26 25 21 Clackamas 84 3 67 18 15 37 26 11 49 39 54 68 18 19 1 2 3 4 5 6 7 8 9 11 12 13 14 15 16 17 18 19 20 other areas Inner & Central SE (Portland) 8 Outer SE (Ptld) Troutdale Fairview Wood Village Gresham Outer NE (Ptld) Inner & Central NE (Portland) 17 17 15 N Portland St. Johns West Vancouver 31 East Vancouver Salem 34 FALL 13 SPRING 14 Eugene Springfield 44 Bend Redmond
portland/vancouver metro area survey results spring 2014 AREA NAME # OF FALL 13 1 BED 2 BED 2 BED 2 BED 3 BED 3 BED DATA ALL STUDIO PROP REPORT CHANGE 1 BATH 1 BATH 2 BATH TWNHS 1 BATH 2 BATH DOWNTOWN PORTLAND 28 AVG MARKET VACANCY RATE % 3.49 2.53 0.38 3.45 3.58 3.88 2.35 0 0 4.17 (5) AVG RENT PER SQ FOOT $ 1.93 1.83 +0.1 1.93 1.93 1.98 1.89 1.2 1.58 1.91 AVG RENT PER UNIT TYPE $ 862 1126 1535 1860 20 1500 2625 SUM OF UNITS SURVEYED 1690 2293 666 783 129 85 2 1 24 NW PORTLAND 60 AVG MARKET VACANCY RATE % 4.25 3.48 0.23 5.81 3.88 1.78 4.09 1.08 2.27 7.26 (1) AVG RENT PER SQ FOOT $ 1.77 1.6 +0.17 2.09 1.86 1.14 1.71 1.2 1.07 1.09 AVG RENT PER UNIT TYPE $ 15 1327 08 1807 1246 74 1405 SUM OF UNITS SURVEYED 4005 3304 68 1613 394 660 93 53 124 INNER & CENTRAL SE 119 AVG MARKET VACANCY RATE % 3.87 2.33 0.66 0.46 6.3 2.25 3.92 1.04 4.35 0 (PORTLAND) AVG RENT PER SQ FOOT $ 1.26 1.18 +0.08 1.81 1.34 1.08 1.43 1.05 0.97 1 (13) AVG RENT PER UNIT TYPE $ 670 839 927 1392 923 76 92 SUM OF UNITS SURVEYED 2766 2400 216 1183 952 153 192 46 24 INNER & CENTRAL NE 81 AVG MARKET VACANCY RATE % 2.38 2.47-0.04 4.12 2.52 1.2 3.06 1.49 0 0 (PORTLAND) AVG RENT PER SQ FOOT $ 1.29 1.31-0.02 1.69 1.31 1.08 1.24 1.21 1.18 1.06 (17) AVG RENT PER UNIT TYPE $ 799 845 945 1239 26 1132 1212 SUM OF UNITS SURVEYED 1726 2023 170 31 333 98 67 23 4 N PORTLAND ST JOHNS 16 AVG MARKET VACANCY RATE % 2.3 2.24 0.3 3.45 2.47 1.72 2.17 3.13 0 - (18) AVG RENT PER SQ FOOT $ 1.34 1.07 +0.27 1.83 1.37 1.11 1.85 1.12 0.96 - AVG RENT PER UNIT TYPE $ 901 936 961 1900 1159 880 - SUM OF UNITS SURVEYED 766 445 58 385 233 46 32 12 0 SW PORTLAND 31 AVG MARKET VACANCY RATE % 2.84 3.04-0.07 3 2.24 3.23 2.88 7.02 6.38 1.87 (6) AVG RENT PER SQ FOOT $ 1.41 1.35 +0.06 1.93 1.61 1.07 1.3 0.98 0.85 1 AVG RENT PER UNIT TYPE $ 52 1269 936 1475 995 931 1170 SUM OF UNITS SURVEYED 2004 2337 200 847 433 313 57 47 7 OUTER SE (PORTLAND) 32 AVG MARKET VACANCY RATE % 3.7 3.57 0.04 0 4.05 4.57 3.58 3.45 2.63 0 (14) AVG RENT PER SQ FOOT $ 0.98 0.98 0 1.21 1.11 0.87 0.98 0.93 0.82 1.04 AVG RENT PER UNIT TYPE $ 640 732 734 966 970 847 1260 SUM OF UNITS SURVEYED 1738 2832 36 499 579 279 203 42 0 OUTER NE (PORTLAND) 22 AVG MARKET VACANCY RATE % 2.41 4.25-0.44 0 3.65 2.65 0.49 2.41 5.26 0 (16) AVG RENT PER SQ FOOT $ 0.87 0.86 +0.01 1.25 0.96 0.85 0.78 0.79 0.78 0.86 AVG RENT PER UNIT TYPE $ 593 658 751 775 789 929 926 SUM OF UNITS SURVEYED 51 1670 6 309 382 205 83 20 46 TROUTDALE FAIRVIEW 33 AVG MARKET VACANCY RATE % 2.34 5.89-0.61 0 2.2 2.03 1.99 5.2 0 2.24 WOOD VILLAGE GRESHAM AVG RENT PER SQ FOOT $ 0.88 0.9-0.02 1.18 1.03 0.81 0.84 0.94 0.91 0.81 (15) AVG RENT PER UNIT TYPE $ 585 716 775 828 971 800 41 SUM OF UNITS SURVEYED 2906 3481 3 591 788 953 250 8 313 CLACKAMAS 6 AVG MARKET VACANCY RATE % 2.7 3.96-0.32-3.6 1.06 3.79 0 0 0 (12) AVG RENT PER SQ FOOT $ 0.97 0.98-0.01-1.07 0.97 0.94 0.69 0.91 0.9 AVG RENT PER UNIT TYPE $ - 803 817 914 768 45 999 SUM OF UNITS SURVEYED 814 1641 0 139 189 396 6 8 76 LAKE OSWEGO WEST LINN 13 AVG MARKET VACANCY RATE % 4.04 3.23 0.25 2.27 3.1 4.72 4.22 0.93 0 9.56 (8) AVG RENT PER SQ FOOT $ 1.2 1.1 +0.1 1.42 1.36 1.07 1.13 0.97 1.26 1.11 AVG RENT PER UNIT TYPE $ 698 927 979 1223 45 1343 1377 SUM OF UNITS SURVEYED 1558 1147 44 580 233 450 7 8 136 MILWAUKIE 35 AVG MARKET VACANCY RATE % 2.49 3.86-0.36 1.42 0.93 3.54 3.19 2.5 2.38 5.04 (11) AVG RENT PER SQ FOOT $ 1.01 0.98 +0.03 1.35 1.08 0.94 1.01 0.83 0.9 0.95 AVG RENT PER UNIT TYPE $ 587 679 791 937 781 911 79 SUM OF UNITS SURVEYED 2350 2617 141 753 840 251 200 46 119 OREGON CITY GLADSTONE 12 AVG MARKET VACANCY RATE % 3.78 2.6 0.46 5 4.58 2.29 3.23 7.69 2.86 4.52 () AVG RENT PER SQ FOOT $ 0.94 0.98-0.04 1.59 1.09 0.88 0.88 0.9 0.92 0.9 AVG RENT PER UNIT TYPE $ 777 775 778 928 749 879 1196 SUM OF UNITS SURVEYED 1469 1613 20 306 349 465 4 39 186 WILSONVILLE CANBY AVG MARKET VACANCY RATE % 3.67 2.67 0.38 0 1.48 3.31 5.19 2.94 0 7.02 (9) AVG RENT PER SQ FOOT $ 1.05 0.99 +0.06 1.63 1.14 0.99 1.1 0.76 0.58 1.02 AVG RENT PER UNIT TYPE $ 861 871 819 1166 775 664 1253 SUM OF UNITS SURVEYED 1200 1613 6 271 453 308 34 14 114 ALOHA 38 AVG MARKET VACANCY RATE % 4.11 2.5 0.65 0 4.21 3.07 5.36 1.03 1.96 2.59 (3) AVG RENT PER SQ FOOT $ 1.08 1.06 +0.02 1.44 1.22 0.99 1.04 0.94 0.93 1 AVG RENT PER UNIT TYPE $ 489 807 858 19 1164 849 1141 SUM OF UNITS SURVEYED 6585 6400 5 1942 1565 2256 97 63 657 4
portland/vancouver metro area AREA NAME # OF FALL 13 1 BED 2 BED 2 BED 2 BED 3 BED 3 BED DATA ALL STUDIO PROP REPORT CHANGE 1 BATH 1 BATH 2 BATH TWNHS 1 BATH 2 BATH BEAVERTON 48 AVG MARKET VACANCY RATE % 3.04 2.36 0.25 4.76 3.39 2.65 3.14 2.99 4.46 1.93 (4) AVG RENT PER SQ FOOT $ 1.06 1.04 +0.02 1.44 1.19 0.95 1.07 1.01 0.85 0.95 AVG RENT PER UNIT TYPE $ 633 802 856 31 18 916 1141 SUM OF UNITS SURVEYED 4357 5672 21 1477 1508 860 67 165 259 HILLSBORO N OF HWY 26 15 AVG MARKET VACANCY RATE % 3.13 4.54-0.31 0 2.73 2.08 3.42 2.78 0 6.43 (2) AVG RENT PER SQ FOOT $ 1.12 1.05 +0.07 1.14 1.23 1.04 1.05 1 0.85 1.04 AVG RENT PER UNIT TYPE $ 611 885 928 64 68 925 1213 SUM OF UNITS SURVEYED 2058 2204 7 814 336 672 36 22 171 TIGARD TUALATIN 47 AVG MARKET VACANCY RATE % 4.37 2.55 0.72 5.31 4.53 3.32 4.88 4.21 3.06 6.79 SHERWOOD AVG RENT PER SQ FOOT $ 1.09 0.98 +0.11 1.51 1.22 0.98 1.05 1.03 0.83 1.01 (7) AVG RENT PER UNIT TYPE $ 719 843 822 38 1237 858 1201 SUM OF UNITS SURVEYED 5165 5875 113 1709 1478 1148 285 98 334 WEST VANCOUVER 31 AVG MARKET VACANCY RATE % 3.32 2.47 0.14 0 3.15 1.17 4.31 3.16 0 6.1 (19) AVG RENT PER SQ FOOT $ 0.93 0.87 +0.06 1.83 1.11 0.85 0.91 0.79 0.77 0.78 AVG RENT PER UNIT TYPE $ 848 762 746 941 826 809 SUM OF UNITS SURVEYED 2743 2593 23 668 596 990 190 29 247 EAST VANCOUVER 17 AVG MARKET VACANCY RATE % 2.99 2.64 0.14 0 2.67 1.65 4.36 3.41 0 3.09 (20) AVG RENT PER SQ FOOT $ 0.97 0.94 +0.03 1.37 1.11 0.93 0.92 0.86 0.86 0.93 AVG RENT PER UNIT TYPE $ 658 734 818 923 841 1345 55 SUM OF UNITS SURVEYED 2420 2043 70 599 486 734 323 38 170 TOTAL AVG MARKET VACANCY RATE % 3.46 3.11 0.12 3.9 3.51 2.71 4 3.25 2.86 4.06 TOTAL AVG RENT PER SQ FOOT $ 1.16 1.1 +0.06 1.88 1.32 0.98 1.06 0.94 0.89 0.97 TOTAL AVG RENT PER UNIT TYPE $ 914 898 852 68 966 943 1161 TOTAL SUM OF PROPERTIES SURVEYED 694 757 160 565 478 203 115 3 166 TOTAL SUM OF UNITS SURVEYED 49371 54203 2873 16499 12256 11322 2428 782 3211 14 12 8 6 4 2 0 vacancy rate since fall 2009 portland/vancouver metro area FALL 09 SPR FALL SPR 11 FALL 11 SPR 12 FALL 12 SPR 13 FALL 13 SPR 14 14 12 8 6 4 2 0 STUDIO 1 BED/1 BATH 2 BED/1 BATH 2 BED/2 BATH 2 BED TH 3 BED/1 BATH 3 BED/2 BATH other areas SALEM & VICINITY 89 AVG MARKET VACANCY RATE % 6.45 4.03 0.6 3.75 5.72 5.14 8.44 2.5 3.33 17.31 AVG RENT PER SQ FOOT $ 0.98 0.86 +0.12 1.39 1.13 0.95 0.91 0.71 1.22 0.92 AVG RENT PER UNIT TYPE $ 541 744 763 893 743 938 11 SUM OF UNITS SURVEYED 3686 4846 80 739 1788 726 80 60 213 EUGENE SPRINGFIELD 22 AVG MARKET VACANCY RATE % 4 3.35 +0.65 4.65 3.93 4.77 3.6 0-2.5 AVG RENT PER SQ FOOT $ 1.02 1.01 +0.01 1.48 1.11 0.94 0.93 0.85 0.88 1.08 AVG RENT PER UNIT TYPE $ 767 744 822 927 952 757 1176 SUM OF UNITS SURVEYED 2341 3074 136 649 799 584 90 3 80 BEND REDMOND 6 AVG MARKET VACANCY RATE % 1.06 1.3-0.2-2.08 0 1.1 0-0 AVG RENT PER SQ FOOT $ 0.75 0.83-0.08-0.65 0.77 0.81 0.77-0.76 AVG RENT PER UNIT TYPE $ - 452 699 791-897 SUM OF UNITS SURVEYED 471 846 0 144 4 182 8 0 33 TOTAL AVG MARKET VACANCY RATE % 5.19 3.53 0.47 4.31 4.73 4.83 5.4 1.3 3.33 11.84 TOTAL AVG RENT PER SQ FOOT $ 0.98 0.91 +0.07 1.45 1.08 0.94 0.9 0.78 1.21 0.95 TOTAL AVG RENT PER UNIT TYPE $ 683 716 778 894 861 929 99 TOTAL SUM OF PROPERTIES SURVEYED 117 91 15 57 69 37 8 14 33 TOTAL SUM OF UNITS SURVEYED 6498 8766 216 1532 2691 1492 178 63 326 *Surveys received from Sec 42, Sec 8 and other subsidized affordable housing programs are not included in the current survey data. 5
trend report : portland metro area CoStar: Search criteria Research Status: Published; Market: Portland; PropType: Multi Family; Sale Date: 4/1/20 3/31/2014; unit: 5 units and greater. CAP RATE NUMBER OF TRANSACTIONS 8. 7.5% 7. 6.5% 6. 5.5% 80 70 60 50 40 30 20 5. 4.5% 4Q 1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 4Q13 1Q14 0 4Q 1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 4Q13 1Q14 PRICE PER SQUARE FOOT $95 $90 $85 $80 $75 $70 PRICE PER UNIT (in thousands) $85 $80 $75 $70 $65 $60 $55 $65 4Q 1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 4Q13 1Q14 $50 4Q 1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 4Q13 1Q14 YEAR 4Q 1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 4Q13 1Q14 # OF TRANS 37 43 45 61 53 42 56 54 76 50 66 59 87 56 TTL $ VOLUME $303,764,138 $6,745,656 $356,155,959 $186,222,133 $286,764,280 $211,727,051 $141,152,370 $197,773,333 $302,770,3 $194,488,400 $226,069,334 $230,177,798 $5,930,986 $141,824,785 TTL BLDG SF 2,705,227 1,861,249 3,259,478 2,133,934 2,583,675 2,7,605 1,439,318 1,901,282 3,202,568 2,048,414 1,940,857 2,4,340 5,265,314 1,387,098 TTL UNITS 84.41 78.68 173.08 119.97 124.46 121.68 96.84 80.27 202.23 6.33 113.03 150.40 240.21 54.26 AVG PRICE 3,676,900 3,427,301 7,539,365 5,225,893 5,421,478 5,300,381 4,218,350 3,496,561 8,809,139 4,631,735 4,923,587 6,551,424,463,548 2,363,566 AVG # OF SF 73,114 43,285 72,433 35,566 48,749 66,112 26,169 35,209 42,701 41,804 29,859 41,558 60,521 24,770 AVG PRICE BLDG SF $112.36 $58.50 $1.28 $96.90 $111.86 $79.09 $99.68 $6.56 $94.98 $95.17 $121.88 $8.51 $98.22 $1.34 MED PRICE P/SF $86.31 $65.13 $79.63 $69.77 $80.74 $85.96 $80.41 $78.76 $80.81 $88.06 $80.20 $80.28 $82.73 $91.03 AVG PRICE P/UNIT $132,027 $68,603 $5,873 $88,384 $1,330 $94,819 $89,938 $3,655 $83,251 $85,227 $94,907 $79,426 $90,446 $1,027 MED PRICE P/UNIT $69,455 $55,354 $73,741 $59,167 $69,500 $73,111 $70,122 $66,056 $68,536 $69,508 $64,000 $69,062 $69,000 $70,938 AVG # OF UNITS 64 37 76 39 54 56 29 36 49 46 37 55 65 25 ACTUAL CAP RATE 5.65% 6.65% 5.35% 5.71% 5.96% 5.9 6.12% 5.66% 6.52% 6.28% 5.09% 6.07% 5.7 6.81% AVG GRM 9.55 9.41 7.91 8.34.70 8.16 9.78 8.03 9.35 8.96 7.90 7.88 8.85 9.14 AVG GIM 7.85 7.70.00 7.88 9.20 8.95 7.71 12.03 6
back in black: the jobs recovery is complete Amy Vander Vliet, Oregon Employment Department The Portland metro area hemorrhaged more than 80,000 jobs during the Great Recession. The bleeding stopped in in 2009, and subsequent growth was erratic and slow. This lackluster performance wasn t surprising given the nature of the recession: financial crises are wide and deep. But each year saw a gradual acceleration in growth, and by the end of 2013 nearly five years into the recovery job levels in the greater metro area finally reached pre-recession peaks with more than 5,000 jobs added since. In other words, employment is at an all-time high. Growth in the early stages of the recovery was powered by strength in manufacturing and professional and business services. More recently, the housing market kicked into solid recovery mode. Sales, starts, and prices all posted strong gains through most of 2013, although numbers have cooled more recently. On the commercial construction side, Intel has hired thousands of workers to build, and then expand, its newest plant. Currently, four of the region s ten broad industries which account for over 40 percent of Portland s jobs are at all-time highs. Even better, all but one are at or above year-ago levels which points to a broad-based and healthy recovery. Adding to the good news, the public sector has stabilized. State and local government budgets have improved to the point where further job cuts are unlikely. Meanwhile, the unemployment rate has declined, albeit slowly. It s come down from a high of 11.1 percent to 6.4 percent in early 2014 the lowest rate since the summer of 2008. It s still several points above historic norms, which is to be expected given that our population continued to grow during and following the recession. One of our economic strengths is that in good times and in bad, people want to live here. The greater metro area added 62,000 residents over the last three years, many of whom presumably entered the labor force. The economy needs to create enough jobs to absorb these workers in order for the rate to return to pre-recession levels. Amy Vander Vliet is an Economist for the Oregon Employment Department, covering the Portland metropolitan area. She produces and analyzes employment trends, including the unemployment rate and monthly job growth in the region s major industries. do you offer incentives? MAP AREA NW Portland Hillsboro/North of Hwy 26 Aloha Beaverton Downtown Portland SW Portland Tigard/Tualatin/Sherwood Lake Oswego/West Linn Wilsonville/Canby Oregon City/Gladstone Milwaukie Clackamas Inner & Central SE (Portland) Outer SE (Portland) Troutdale/Fairview/Wood Village/Gresham Outer NE (Portland) Inner & Central NE (Portland) North Portland/St. Johns West Vancouver East Vancouver Salem/Vicinity Eugene/Springfield Bend/Redmond FALL 2013 SPRING 2014 4.1% 2. 1.6% 2.2% 4.9% 4.4% 11.1% 3.9% 4% 8.8% 9.3% 11.8% 5.9% 5.6% 12.5% 4.6% 2.5% 3. 2.2% 4.7% 8.3%.3% 2.6% 1. 1.1% 3.2% 3.3% 5.6% 9. 11.1% 22.7% 5.7% 16.1% SECTION 42 SURVEY RESULTS SPRING 2014 TOTAL # OF PROPERTIES = 81 TOTAL # OF UNITS = 7407 UNIT TYPES VACANCY AVG. RENT RATE (%) PER SQ FT ($) STUDIO 1.31 1.52 1 BED / 1 BATH 1.57 1.12 2 BED / TH 2.32 0.94 2 BED / 1 BATH 1.02 0.90 2 BED / 2 BATH 7.91 0.97 3 BED / 1 BATH 0.78 0.82 3 BED / 2 BATH 2.67 0.80 TOTALS 1.89 1.09 7
portland metro apartment construction update By Patrick O. Barry and Mark D. Barry, MAI In 2009, we were in the depths of the Great Recession, and new apartment construction came to a screeching halt. But at the same time, demand for apartments in Portland was growing. Developers took note, and we are now are in the midst of an apartment construction boom. This article analyzes where we are in the current construction cycle, and the expected impact on apartment vacancies. In order to gauge where we stand today, we visited every site with apartments recently completed, under construction, or proposed. A Brief History How did our apartment vacancy rates drop so low in recent years? In the not so distance past, during Fall 2009, Multifamily NW reported a 5.9% vacancy rate for the Portland Metro area. Around this same time, the economy started its nosedive. Unemployment jumped, home foreclosures spiked, and any type of construction financing, commercial or residential, was difficult if not impossible. However, Portland remained a popular destination and our population grew by around 75,000 from 2009 to 2012. These people needed a place to live, along with the scores of those that lost their homes to foreclosure or unemployment. All of these factors combined would have a positive effect on apartments, and set the stage for our current apartment construction boom. Inventory and Vacancy Based on information provided by the 20 US Census and with adjustment for apartment permits in more recent years, the Portland Metro area has around 270,000 multi-family units. Using the 3.5% apartment vacancy rate from the Spring 2014 Multifamily NW report, we have around 9,500 vacant units. If one assumes that a market in balance will show a 5. vacancy rate, then there is a current shortage of 4,000 units. Historical Apartment Permits There is no denying that the apartment construction market is hot right now. During 2013, permits were issued for 5,800 new units in the Metro area. This is the most active year for apartment construction since the late 1990s. This is a drastic reversal from 2009, when permits were issued for just 1,000 units. Through February 2014, permits have been issued for 866 units across the Metro Area. Portland Metro Vacancy Rates (Multifamily NW) Vacancy Rate 7. 6.5% 6. 5.5% 5. 4.5% 4. 3.5% 3. 2.5% 2. 3.2% 3.3% 3.6% 2.9% Spring 2007 Fall 2007 Spring 2008 Fall 2008 Spring 2009 5.2% 5.9% 5.1% 4. 3.8% Fall 2009 Spring 20 Fall 20 Spring 2011 Fall 2011 3.3% 3.7% 3.6% 3.6% Spring 2012 Fall 2012 Spring 2013 Fall 2013 3.1% Spring 2014 3.5% Supply and Demand: 2009-2012 Given the recent single-family crash, many were not eager to become homeowners and demand for apartments was on the rise. Using conservative estimates, we will assume an average household size of 2.40 persons, and a home ownership rate of around 65 percent. Using these assumptions, growth of 75,000 people translates in to demand for roughly apartment 11,000 units. And this figure does not account for demand from those who left the single-family market and entered the rental market, or demolition. While there was demand for at least 11,000 new units from 2009 to 2012, permits were issued for 7,400 new units in the Portland Metro area. Thus, the Portland Metro area was short by at least 3,600 new units over this time period. By Fall 2013, vacancy rates had dropped to just over 3.. While construction is hot right now, it s worth taking a look at a few long-term trends to gain some perspective. From 1990 to 2007, the Portland Metro area averaged permits for just over 4,700 new units per year. When you look at 2008 through 2012, we averaged permits for just under 2,0 units, less than half of our average from the previous 17 years. Specific information on the permit history for the four County metro area from 1990 through 2013 is summarized as follows: Apartment Permits 1990-2013 Four County Metro Area Units 280 unit block 17 (foreground) 177 unit the parker (background) NW 11th and overton street 7,921 6,806 6,652 6,723 6,363 5,821 5,491 5,4 5,266 4,541 4,185 4,471 4,266 3,325 3,280 2,651 2,806 3,030 2,853 2,724 2,539 2,045 1,099 (continued on page 9) 8
(continued from page 8) New Apartment Construction It s no secret; the Portland Metro apartment construction cycle is in full stride and is picking up steam. This current construction cycle has not only attracted local and regional developers, but also many national developers. The 2014 ULI Emerging Trends recently ranked Portland 11th among 50 metro areas for real estate investment. While the commercial and single-family construction markets remain sluggish, developers have flocked towards apartments. For the first time on record, permits for apartments outpaced permits for single-family homes. Permits were issued for 5,821 new apartment units in 2013. This is 2,500 more permits than was issued in 2012. Our figures show that at least 75 projects with 6,850 new units were completed over the last 18 months. Some of these projects have already stabilized, while others remain in lease up. Our research shows an additional 6,500 units currently under construction across 56 projects. Over 65% of these projects are in the urban area. Most of these projects will be complete by the second half of 2014 or during 2015. The number of units under construction is slightly higher than what our research showed from Spring 2013, as new larger projects have replaced completed projects. 4 unit the addy apartments 1721 nw northrup street 80 unit richmond flats 3701 se division street When we look at the number of proposed units, we have seen a drastic increase from one year ago, as the economic recovery has continued. Twelve months ago, in Spring 2013, we were tracking 7,500 proposed units across 60 projects. Our most recent figures show nearly 14,000 proposed units across 125 projects. That is an 87% increase over 12 months. A vast majority of these projects were identified from activity on the public records through permit applications or requests for design assistance. This typically means that a significant amount of money has already been spent on acquiring land, developing drawings, commissioning market studies, and other pre-construction related costs. Most of the projects taken to this level will get built. Developers are racing to get their project out of the ground before lenders start to question the extent of demand for all the new units. However, it s inevitable, that the plug will be pulled on some of these projects, but other new projects not yet announced or still in the planning stage are likely to emerge. Clark County 5.8% Suburban South 7.4% Suburban East 0. North Portland 13.6% Clark County 8.9% Suburban South 6.9% Suburban East 4.1% North Portland 7.8% Close in East Portland 13.4% Suburban West 20.6% Close in East Portland 32.8% Suburban West 33.1% Close in West Portland 25.9% Close in West Portland 19.9% under construction by location (continued on page ) units proposed by location 99 unit se alder apartments 700 se cesar chavez blvd 367 unit eddyline apartments 18055 sw lower boones ferry 56 unit nw micro apartments (shared kitchens) 2250 nw thurman street 134 unit jefferson st flats 2040 sw jefferson st 9
(continued from page 9) Specif ic Submarkets and Building Trends The new construction is by no means evenly distributed across the Portland Metro area. A few select areas have seen a disproportionally large number of units under construction and proposed. This includes the north end of Northwest Portland, the area surrounding Portland State/Goose Hollow, near the South Waterfront and the East Burnside Bridgehead. north end nw portland portland waterfront While the selected areas above show high activity, many areas have seen very few units since 2008. This includes most of Clackamas County, east Multnomah County, and some pockets of Washington County including Tigard and East Beaverton. As more projects are announced, the size of the projects appears to be scaling up. There are currently 13 buildings with over 0 units under construction in the urban area. However, there are an additional 26 proposed urban buildings with over 0 units. This could lead to longer lease up periods as a large number of units are delivered in a short period of time. Many developers have bet heavily on specific unit types, which may or may not be accepted by the market. When consumers have more choices for apartments, less desirable unit types can fall out of favor. ptld state/goose hollow under construction proposed east burnside bridgehead New Units and Impact On Apartment Vacancy Rates Metro is forecasting that from 20 to 2035, the population of the Multnomah, Washington, Clackamas and Clark County will grow by 781,152. This averages roughly 31,000 people per year. Using similar assumptions on household size and home ownership rate, this translates into demand for around 4,500 units per year, very close to our historical average for permits. There is also felt to be some pent up demand from those who found roommates, or moved in with friends and family during the recession. Pent up demand is difficult to quantify, but some demand exists. In 2014 and 2015, we expect completion of around 12,000 to 14,000 new apartment units. This figure includes the units currently under construction and as well as proposed units. Based on the figures discussed in this article, new units in the coming years will exceed current demand. However, to reach a market in balance, vacancies around 5%, we need an additional 4,000 units in excess of current demand. We expect the new units during 2014 and 2015 to bring the Portland apartment market to a more balanced state. We expect apartment vacancies to gradually increase in 2014, and be at 4.5% to 5.25% by late 2015. This will result in a shift from a landlords market to a market more in balance over the next 18 to 24 months. Additional Risks As with every real estate cycle, there are some considerable risks as we move along the curve. Risks specific to our current cycle include: An increase in the home ownership rate. As the single-family market continues to improve, a strong increase in the home ownership rate would dampen demand for apartments. Oversupply. If all the proposed units are delivered in a short period of time, some projects will experience slow absorption and higher vacancies. Increasing rents and the Portland Economy. Many of the new units are aiming for the very top of the rental market in Portland. We reviewed a few advertised rents for various unit types. We found new some studios around $1,200, one-bedrooms up to $1,900 and two-bedrooms up to $2,500. If up to a third of one s income could be spent on housing, what incomes levels are these developers targeting? Given the rents listed above, household incomes should range from $43,000 for a studio, up to $90,000 for a two-bedroom unit. Does Portland have the economy to support these income levels, at the number of units to be delivered? And at what point does the renter paying $1,500 to $2,500 per month decide they d rather own a home? Conclusions Based on the current level of units under construction and proposed, the majority of the Portland metro area apartment market will not become saturated, and will not result in an overbuilt market in the short term. However, some neighborhoods will experience slow absorption, higher vacancies, and possible concessions or rent reductions until there is sufficient time for the new units to be absorbed. The primary neighborhoods of concern are the urban areas with large numbers of units expected to be delivered in a short period of time. Older, established apartments in these neighborhoods should be less affected, due to substantially lower rents. Patrick O. Barry (pb@barryapartmentreport.com) is an Appraiser Assistant with Mark D. Barry & Associates, which specializes in apartment appraisal work in the Portland metropolitan area. Patrick is an engineering graduate of the University of Colorado. He was assisted by Mark D. Barry. 28 unit division street 3330 se division street 211 unit grant village 3246 ne broadway
TOTAL # OF UNITS: 13,011 TOTAL # OF PROPERTIES: 8 EXPENSES REAL ESTATE TAXES PROPERTY INSURANCE PROFESSIONAL OFF-SITE MGMT ON-SITE MGMT/LEASING MAINT STAFF OFFICE/ADMINISTRATION ELECTRICITY WATER AND SEWER GARBAGE GAS/OIL TELEPHONE/INTERNET ADVERTISING/MARKETING LANDSCAPE/GROUNDS MAINTENANCE MAINTENANCE AND REPAIRS (int&ext) TURNOVER COSTS (painting, cleaning, etc.) MISCELLANEOUS TOTAL 2013 PORTLAND MSA APARTMENT OPERATING EXPENSES (not including capital expenses or reserves) MULTNOMAH COUNTY WASHINGTON COUNTY CLACKAMAS COUNTY CLARK COUNTY 2000-CURRENT 1951-1999 19-1950 URBAN-STYLE 2000-CURRENT URBAN-STYLE 1951-1999 URBAN-STYLE 19-1950 2000-CURRENT 1951-1999 2000-CURRENT 1951-1999 1951-1999 151 2165 384 1272 408 279 3502 2150 124 708 1868 4 23 3 8 3 9 15 19 2 9 13 1.23 1,228 1.15 976 1.33 1,141 0.88 633 0.70 602 1.53 868 1.14 1,065 1.07 899 0.41 313 1.28 942 1.11 898 0.18 162 0.23 194 0. 62 0.16 115 0.44 307 0.24 131 0.16 171 0.18 152 0.28 191 0.19 159 0.21 166 0.42 397 0.46 398 0.55 344 0.67 506 0.74 487 0.77 483 0.32 298 0.42 368 1.39 984 0.72 596 0.40 334 0.62 616 0.60 540 1.14 717 0.98 756 1.14 667 1.18 623 0.56 540 0.66 559 1.04 685 0.98 808 0.73 624 0.20 185 0.22 188 0.26 226 0.37 252 0.41 317 0.16 94 0.17 182 0.17 146 0.56 372 0.26 235 0.23 186 0.09 81 0.12 95 0.09 74 0.35 238 0.35 232 0.27 157 0. 98 0. 83 0.46 316 0.08 73 0.08 64 0.52 517 0.64 516 1.23 774 0.79 515 0.96 540 0.77 433 0.62 577 0.74 638 0.67 465 0.95 686 0.47 394 0.17 153 0.16 136 0.26 82 0.11 73 0.14 84 0.15 96 0.18 180 0.18 159 0.12 82 0.21 146 0.13 121 0.01 4 0.00 0 0.11 83 0.17 96 0.11 82 0.11 74 0.00 0.00 0.02 18 0.07 74 0.04 35 0.04 30 0.07 66 0.09 53 0. 52 0.03 29 0.05 40 0.19 127 0.08 49 0.04 31 0.07 65 0.04 37 0.12 42 0.09 66 0.08 73 0.02 11 0. 93 0.05 41 0.09 62 0. 86 0.17 149 0.20 190 0.20 158 0.26 165 0.20 140 0.08 69 0.09 51 0.23 251 0.29 238 0.13 83 0.20 162 0.24 205 0.69 627 0.72 614 1.09 706 1.08 821 1.24 605 1.30 703 0.64 598 0.77 663 0.70 450 1.51 917 0.87 774 0.16 141 0.28 237 0.21 180 0.12 97 0.37 201 0.45 253 0.30 287 0.24 203 0.18 121 0.23 151 0.14 118 0.00 0 0.00 0 0.00 0 0.00 0 0.00 0.00 0.00 0 $4.62 $4,436 $4.88 $4,129 $6.68 $4,541 $5.97 $4,360 $6.91 $4,331 $7.15 $4,037 $4.53 $4,370 $4.91 $4,189 $6.34 $4,325 $6.80 $5,009 $4.82 $4,082 11
THE Apartment Report Thank you to all who contributed to the making of this report. 150 SW GAARDE ST 2959 SE MONROE ST 4118 SE 29TH AVE AMERICAN PROPERTY MANAGEMENT AMY MARKS BLUESTONE & HOCKLEY REALTY BRISTOL EQUITIES INC BUNTING MANGEMENT GROUP C&R REAL ESTATE SERVICES CAMBRIDGE REAL ESTATE SERVICES CANYON PROPERTY MANAGEMENT CAPITAL PROPERTY MANAGEMENT CASA VERDE CASCADE MANAGEMENT INC/HAP CHERRY RIDGE COURTYARD PROPERTIES CSM CORPORATION CTL MANAGEMENT, INC. DORINNE J PEDERSEN EMILIE HOUSE FJK PROPERTIES FRANKLIN HOUSE GARDEN VILLA APARTMENTS LLC GENEVIE HENDERSON GSL PROPERTIES GUARDIAN REAL ESTATE SERVICES HALL EQUITIES GROUP HEATHERWOOD APARTMENTS HOLLAND RESIDENTIAL ICM RESOURCES INCOME PROPERTY MANAGEMENT JENDI PROPERTIES JENNINGS GROUP INCORPORATED JIL DEVELOPMENT JK MANAGEMENT Multifamily NW 16083 SW Upper Boones Ferry Road Suite 5 Tigard, OR 97224 503 213 1281 This report would not be possible without the dedication and commitment of the Multifamily NW staff and the Apartment Report Committee. Thank you to the many contributors, writers and consultants who have generously taken the time to provide this information. JOE LONG KEY PROPERTY SERVICES KNOLL WEST PROPERTIES LLC LIBERTY MANAGEMENT GROUP LUCRETIA COURT APTS MAINLANDER PROP MGMT MICHAEL D AND LAWRENCE D KAY LLC MT. PLEASANT NBS MULTIFAMILY MANAGEMENT NORTHSHORE NORTHWEST HOUSING ALTERNATIVES OT2 LLC PRINCETON PROPERTY MANAGEMENT PROMETHEUS REAL ESTATE GROUP QUANTUM RESIDENTIAL QUEEN JEANETTE APTS. RAYMOND E CRITES REACH COMMUNITY DEVELOPMENT, INC. REGENCY MANAGEMENT INC RIVERSTONE RESIDENTIAL RKB PROPERTIES ROBERT & CONNIE MAGER ROBERT J ELLIOT ROUND HILL PACIFIC ROYAL OAKS APARTMENTS SKYNAT LIMITED PARTNERSHIP STERLING MANAGEMENT GROUP, INC. SUNSHINE MEADOWS TELLCO PROPERTY MANAGEMENT TOKOLA PROPERTIES WELLINGTON SQUARE APARTMENTS WILSONVILLE SUMMIT WOODWINDS & JENNINGS LLC WPL ASSOCIATES For more information on Multifamily NW or to comment on this report, please visit us on the web at www.multifamilynw.org. The opinions contained in this report are those of the authors and do not necessarily represent the opinions or positions of Multifamily NW. 12 2014 multifamily nw board of s Pam McKenna Riverstone Residential president Scott Arena Quantum Residential, Inc. vice president Dave Bachman Cascade Management, Inc. secretary Chris Hermanski Mainlander Property Management treasurer Paul Hoevet HD Supply Facilities Maintenance immediate past president Dan Addis Income Property Management Kirsten Bailey Bristol Equities, Inc. Barb Casey Kennedy Restoration Jeff Edinger Tokola Properties Gary Fisher Background Investigations, Inc. Andy Hahs Bittner & Hahs, P.C. Eve Henderson C&R Real Estate Services Jill Keoppel Income Property Management Greg Knakal Princeton Property Management Renee Larsen Apartment Finder Maureen MacNabb Capital Property Management Jami Sterling Sterling Management Group Korah Young GSL Properties