CPN 2008 GreenBook

Industry Update Fortunately for apartment owners, banks typically shy away from residential property management; therefore, most By Linwood Thompson foreclosures will not hit the rental market directly. Furthermore, many for-rent houses sit in far-reaching suburbs, which high gas prices have made less attractive. Between early 2000 and year-end Growth in Apartment Competition Offset 2004, the homeownership rate rose from By Market Forces, Controlled Expansion 66.9 percent to 69.2 percent and total he most pervasive theme of U.S. generally appear in supply-constrained renter households declined by 1.7 million. economic performance over the coastal markets like Seattle, Los Angeles, However, the trend began to reverse in past 20 years can be summed up San Francisco, New York City, Philadel- 2005. Since then, the homeownership rate in one word: resilience. The economy has phia, Boston and Orange County, Calif. has fallen to 67.8 percent, which translates demonstrated agility and performed to 2.3 million households that better than expected after a series of require alternative housing. Vacancy Tide Rises shocks, including the 1987 stock Developers are slated to deliver market crash, the collapse of the sav- 7% 102,000 apartments in 2008, up ings and loan associations, the 1991 6% from 91,488 in 2007. In addition, recession, the Asian financial crisis 5% several conversion projects have of the late 1990s, the dot-com col- 4% returned to apartment stock during lapse, the Sept. 11, 2001, attacks, 3% recent quarters. Despite the rise in corporate scandals and the broad 2% new supply, 2008 development wave of offshoring. activity will remain low compared 1% Despite the economy’s resilience, to the period between the late the multi-family industry faces chal- 0% 2000 2001 2002 2003 2004 2005 2006 2007 2008 1990s and 2003, when completions lenges. If market forces and the gov- Sources: Marcus & Millichap Real Estate Investment Services Inc. and Forecast averaged 150,000 units annually. Reis Inc. ernment’s tendency to address past And the slower economy and problems are any indication, protighter financing climate will likely Rental Rate Takes a Dip longed economic contraction is cause construction starts to fall, 9% unlikely, but a rapid recovery is not 8% potentially resulting in a shortage anticipated either. The subprime 7% of units during the next three years. mortgage debacle hasn’t detoriorat- 6% Seasonal fluctuations and job losses helped the national aparted commercial real estate market 5% ment vacancy rate rise 10 basis fundamentals to the degree that has 4% points to 6 percent in the second been reported. Instead, the news has 3% quarter. The rate is expected to created a crisis of confidence among 2% increase to 6.2 percent by year-end investors (see “Housing Wealth 1% 0% Sinks to Bottom” at right). as the softer employment market 2000 2001 2002 2003 2004 2005 2006 2007 2008 limits household formation and Forecast Sources: Marcus & Millichap Real Estate Investment Services Inc. and Reis Inc. forces some renters to double up. Battle for Tenants Apartment owners face increasThe Class B and C markets will Housing Wealth Sinks to Bottom ing competition from for-rent conremain the most stable as slower dominiums and single-family economic growth and high energy $500 75% homes, particularly in oversupplied costs limit renters’ options. Class A $400 70% markets in the Southeast and Southassets will benefit from reduced $300 west. The number of vacant condos migration of renters to homeown65% and houses significantly increased ership but will also face greater $200 60% during the first half of 2008, owing competition from shadow rentals. $100 55% in part to a foreclosure spike. MetMarketwide, modest softening will ropolitan areas that have the highest result in increased concessions. $0 50% homeowner vacancy rates include Linwood Thompson is senior $-100 45% the Florida cities of Orlando, vice president & managing direc$-200 40% Tampa, Miami, West Palm Beach tor for Marcus & Millichap Real 19 19 19 19 19 19 19 19 19 20 20 20 20 77 80 82 85 87 90 92 95 97 00 02 05 07 and Jacksonville, as well as Las Estate Investment Services Inc.’s Sources: Marcus & Millichap Real Estate Investment Services Inc. Vegas. The lowest vacancy rates and the Federal Reserve System National Multi Housing Group. Market Resilience T Net Change in Housing-Related Net Worth in billions 4 Commercial Property News Owners' Equity in Household Real Estate The 2008 Multi-Family Greenbook

Table of Contents Feed for the Digital Edition of CPN 2008 GreenBook

CPN 2008 Greenbook Table of Contents Industry Update Green Update Giants Owners, Managers & Developers REITs Finance Firms Seniors Housing Providers Service Firms Software Providers Activity Index Alphabetical Master Listings

For optimal viewing of this digital publication, please enable JavaScript and then refresh the page. If you would like to try to load the digital publication without using Flash Player detection, please click here.