CPN - January 2009 - (Page 7)

MULTI-FAMILY Shadowboxing Apartment Owners Face Off Against Single-Family, Condo Shadow Markets By Eugene Gilligan haul. Still, as an overhas now returned to built single-family the pre-condo-boom home market continlevels of the late 1990s: ues to rock the area, Miami apartments are apartment landlords 95 to 96 percent occuthere—as in its sunny pied, those in Broward East Coast counterpart, County 92 to 94 perSouth Florida—are cent, he reported. Palm for now focused on Beach’s occupancy rate finding new tenants is closer to 90 percent. and retaining those “We’re seeing ownin place. ers roll up their sleeves Pacific Property and work really hard Assets has introduced on retaining their tensuch perks as laundry ants,” said Apartment drop-off service, flat Realty Advisors senior screen TVs and even vice president Avery payment of the last Klann. Landlords in month or two of rent certain submarkets are on a prospective tenoffering concessions At Downtown Miami’s One Broadway luxury apartment building, ant’s lease elsewhere. like one month of free the Rilea Group offers furnished apartments and concierge serv“Rather than having rent prorated on a ices, in part to fight the shadow rental market. them think about it for 13-month lease. They are also exhibiting greater flexibility targeting tenants who are renting a month or two, we get them in SOUTH FLORIDA’S BARGAIN HUNTERS From 2000 to 2006, condo con- when evaluating prospective ten- bargain condos that are not quite our property,” said CEO Michael versions removed 20 percent of ants, no longer shunning someone working out. “If you (as a condo Stewart, whose company owns South Florida’s apartments from just because he or she has been the renter) need something fixed and 1,550 units across 12 communities. Smith reported that an 800-unit inventory,and apartment occupancy victim of a home foreclosure.“Land- you’re not a member of the homelevels reached as high as 97 percent lords have adjusted a little bit,” owner’s association, you may be out Phoenix apartment property owned in 2004 and 2005,reported Rosendo Klann said.“They may see (foreclo- of luck,” Ojeda noted. Some renters by Sterling American is performing have also been turned out of con- up to the company’s expectations. Caveiro,senior director of multi-fam- sure) as a one-time event.” To compete with the shadow dos that have been foreclosed on. Two qualities in its favor: a dearth of ily housing for Cushman & Wakefield Inc.’s Miami office. That figure condo market, the Rilea Group is Rilea also offers some furnished vacant single-family homes in the apartments to compete with the immediate area and proximity to mostly unfurnished condo segment. two office complexes that house Beauty in the Eye of the Beholder While the shadow market American Express and USAA. Brad At least some multi-family markets are holding their own. receives much of the blame for ris- Goff, principal for Apartment Realty In Seattle, a diverse roster of high-tech firms, as well as The Boeing Co., provide Advisors’ local office, noted that ing rental vacancy, Caveiro believes a strong employment base, boosting the multi-family sector, noted Guardian Manthat the general economy’s woes institutional apartment owners posagement L.L.C. president Tom Brenneke. And Portland, Ore., boasts a low single-famdeserve a large share of the direct sess built-in lease-up advantages ily foreclosure rate, he added. Strict environmental regulations and limited land also blame. “If you have job losses, over single-family homeowners, make apartment development there a challenge. “The housing supply-demand young workers may move back such as the ability to run highly visiequation is in balance, overall,” he said. with their parents, or many look ble advertising campaigns. Guardian, however, recently invested in 4,000 apartment units that span stable and According to Stewart, Phoenix’s for roommates,” he pointed out. troubled multi-family markets. It acquired the real estate portfolio of Atherton-Newport economy has received two big hits: Investments L.L.C., which has been working under Chapter 11 reorganization since a falloff in construction jobs and an PHOENIX’S LONG-TERM PROSPECTS January 2008 and owned properties in Seattle, Las Vegas, Phoenix and Miami. An early victim of the U.S. hous- immigration law that took effect on Acknowledging that the latter three cities are “tough markets,” Brenneke said ing meltdown, Phoenix is six to Jan. 1, 2008, enacting stiff sanctions Guardian will restructure debt and reposition the assets. Still, he expressed optimism nine months farther into the reces- on employers that hire illegal aliens, for Miami’s long-term viability and stated that Phoenix should also enjoy long-term job sion cycle than the country as a many of whom had been renters. and population growth. And while Vegas suffers from a lack of diverse employment Continued on page 24 ® whole, and Jeff Smith, senior vice drivers, he predicted that the city’s economy is likely to bottom out within two years. He also noted that Guardian needs to give Seattle, the acquired portfolio’s goldpresident of acquisitions and dispoVisit www.cpnonline.com/search and en child, its fair share of attention. JPMorgan Chase & Co. recently purchased one of sitions for Sterling American Properenter key words “revenue shortfalls” to the city’s largest employers, Washington Mutual Inc. Even if employee cutbacks ty Inc., is bullish on the city’s read about the shadow market’s effect on occur, however, Brenneke said, “it’s not a death knell for Seattle.” South Florida’s condominium sector. growth prospects over the long A t Downtown Miami’s 371-unit One Broadway luxury apartment building, three employees are on standby 24 hours a day to honor tenants’ requests. The building’s owner, Rilea Group, also offers valet parking and may even supply new carpet or fresh paint jobs to tenants whose leases are up for renewal. According to CEO Alan Ojeda, going above and beyond is business as usual in the fight to attract and retain tenants in South Florida’s tough multi-family market. The region’s vacant condominiums, as well as unoccupied singlefamily homes in Phoenix and Las Vegas, have created large shadow rental markets that pose challenges to apartment owners trying to keep their buildings occupied. www.cpnonline.com • January 2009 • COMMERCIAL PROPERTY NEWS 7 MARKET INTELLIGENCE http://www.cpnonline.com/search http://www.cpnonline.com

Table of Contents Feed for the Digital Edition of CPN - January 2009

CPN - January 2009 Contents Starting Line Multi-Family Data/Analysis Conferences Philadelphia Market Profile International Markets for U.S. Investment CPN-CoreNet Roundtable Finance International Development Title Insurance

CPN - January 2009

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