The timing for the development is still being determined, but the builder is planning as many as 390 multifamily units in what will be a Mediterranean-style structure.

Other areas like Cleveland, Ohio, Denver, Colorado, Houston, Texas, Atlanta, Georgia as well as the San Francisco-Oakland Bay Areas of California saw vacancy rates flatten out or improve somewhat during 2011, according to the National Association of Realtors (NAR).

The 2012 Forecast for Multifamily Rental Markets

The apartment rental market (aka multifamily rental housing) is expected to see vacancy rates drop from a nationwide average of 5.0 percent in the fourth quarter of 2011 to 4.3 percent in the fourth quarter of 2012, again according to the NAR. Multifamily vacancy rates below 5 percent generally are considered a landlord’s market with demand-supply factors usually leading to higher rents and higher capitalization rates for owners.

Areas in the U.S. with the lowest multifamily vacancy rates currently are Minneapolis, Minnesota, 2.4 percent; New York City, 2.7 percent; and Portland, Oregon, at 2.8 percent. According to the NAR, the average apartment rent was projected to rise 2.5 percent by the end of 2011 and another 3.5 percent in 2012. That’s an amazing 40% increase year-over-year! Multifamily net absorption is likely to be around 238,400 units all tolled for 2011 and 126,600 in 2012.

The number apparently drops in 2012 because of a considerable reduction in supply. The true measure of change in total demand is net absorption. Gross absorption is often an inappropriate and potentially misleading indicator in terms of understanding and evaluating changes in total demand for rental units.

How Rental Housing is Being Advertised and Vacancies Filled

2012 will see the expansion of rental housing being advertised online or via sites that correlate to the explosive growth in the usage of Smart Phones and tablets such as the Apple’s iPad. The following video is a reminder of how many property managers around the nation are choosing to advertise vacant rentals using the worldwide web and why (click here).

Property managers are also finding that social networking sites, like Facebook and Twitter, can be another great channel to market vacancies. Specialty websites like RentVine.com have been used by an increasing number of owners and property managers to expand their advertising of vacancies online. That trend should continue and grow in 2012.

The number of houses going into foreclosure increased exponentially in 2011. As a result, the number of displaced former homeowners looking for rentals increased to record levels. The good news is that the year 2012 looks very bright and promising for the property management industry and for both single and multifamily rental housing owners

reprint from PropertyManager.com             by Marc Courtenay

Grand Lakes Marketplace will be anchored by Whole Foods, Stein Mart and a proposed Cost Plus.

Members of the Katy Area Economic Development Council received an update on the project Tuesday.

The development will also feature approximately 38,000-square-feet of small shop space with prospects including Carrabba’s, Menchie’s and Massage Heights.

“It’s basically an extension of our development on the southwest corner of Meadows Marketplace, which is basically 250,000 square feet of retail including H-E-B, Palais Royal, Hobby Lobby, along with some other retails,” said John Clinkscales, a marketing representative with Fidelis Realty Partners.

“That property is fully occupied, and we’re working with Seven Lakes to begin construction (of Grand Lakes Marketplace) during the early part of next year,” he said.

Construction is expected to be completed by late summer, and the development is anticipating Thanksgiving openings.

“The Wells Fargo that’s existing on the corner is not a part of that shopping center. We are building around that,” Clinkscales said.

“The anchor box on the far left is Stein Mart, and the one next to it is Whole Foods, the proposed Cost Plus and then two spec retailers,” he said. “We are 100 percent committed to the deals on the left and about 50 percent committed on the L-shape.”

Let me know if you want to contact them.

The third quarter of 2011 marked the transition from the recovery phase of multifamily into the expansion phase, adds Gleb Nechayev, senior managing economist at CBRE Econometric Advisors. “It returned to—and actually surpassed—the previous peak in terms of revenues, and by that metric it is well ahead of other property types,” he notes.

According to the most recent analysis from CBRE Econometric Advisors, the U.S. multi-housing vacancy rate will hold steady at 5.5 percent in 2012—down 60 bps year-over-year and 190 bps from its peak in 2009—and actually decline an additional 30 bps in 2013.

And while rent growth varies dramatically from market to market, the average national rent growth is expected to surpass the rate of inflation this year, according to Ryan Severino, senior economist at Reis Inc.

Because of these factors, the multifamily sector is currently the favored asset class of most commercial real estate investors, adds Jubeen Vaghefi, national multifamily practice leader for Jones Lang LaSalle. He points out that “the downside risk in the multifamily sector is relatively limited, and more and more investors are leaning in favor of multifamily.”

Overall, the market has become much tighter, even without any real job growth, says Severino, adding, “any semblance of demand and job creation is going to get people out of their parents’ basement and out of two- and three-bedroom [units] and into their preferred studios and one-bedrooms. Even if we have unspectacular job growth, it will still be a boon for the apartment sector.”

Top-performing markets

While industry experts don’t agree on every market, they do all note that markets with high concentrations of high-tech employment will likely lead the growth in the multi-housing recovery. Nechayev’s list, for example, includes San Francisco, San Jose, Austin, Denver and Seattle among the top performers.

Severino mostly agrees with this list, adding to it the New York and Washington, D.C. metro areas. In addition to New York City, which typically sees tight vacancies and rental growth, the metro area as a whole—Westchester and Fairfield County, for example—has also been faring well, he points out. And in D.C., Severino notes that “despite the saber-rattling over the government cutting spending, the government is still really resilient … so as long as the nation’s capital doesn’t get relocated from D.C., there will be a lot of strength underpinning the metro markets there,” he adds.

Nadji’s list is comprised of those markets “with the least risk and the highest rent growth.” In addition to San Jose, San Francisco, New York and Washington, D.C., he adds Boston, Orange County, San Diego, Austin, Seattle and Minneapolis to the list of top performers. These markets, says Nadji, have low vacancies, the potential for strong job growth and, in the short term—with the exception of Austin—little to no construction on the horizon.

Meanwhile, Nechayev points to some secondary markets that he considers at the top for the year to come. These include Pittsburgh; Albuquerque, N.M.; and El Paso, Texas, though he does warn that the growth in these areas is “likely to slow down a little bit,” as these markets are fairly affordable, and more people will likely begin to pay attention to where rents are relative to the cost of buying homes.

But, cautions Severino, performance in secondary and tertiary markets tends to be idiosyncratic. “I was looking, on a year-over-year basis, which smaller markets had the largest rent improvements, and it was a random mix of markets,” he explains. “Smaller markets … do tend to exhibit that kind of random performance pattern. Next year, we can see completely different markets having the strongest year-over-year rent growth,” he predicts.

Are there any markets to avoid?

Severino points out that the multifamily arena is the one sector of commercial real estate where most, if not all, metro areas are currently improving. “Even the markets that are kind of at the bottom, that are not performing as spectacularly, as the best-performing markets, are still showing generally positive fundamentals,” he adds.

Nechayev agrees, stating that he doesn’t think that any apartment market should necessarily be avoided. “At this point, it is not so much a question of whether we will have growth next year or not—it’s just how strong the growth will be,” he notes.

When pressed, industry experts did point to markets that still have some catching up to do. Las Vegas, for example, remains 20 percent below its pre-downturn revenues, while Phoenix is still off by about 12 percent, reports Nechayev. Atlanta, meanwhile, is down 8 percent, and Los Angeles remains off by about 6 percent. However, these markets should see stronger job growth and limited new supply in 2012, so, says Nechayev, “this will certainly help these markets to move much closer to where they were before the downturn.”

Meanwhile, Houston, Dallas, Phoenix, Tampa and Orlando continue to suffer from relatively high vacancies, but, Nadji points out, they are expected to recover so rapidly over the next 12 to 18 months that they may post stronger occupancy and revenue growth than his previously listed top 10 markets. He adds that vacancies in these markets are declining 200 to 250 bps per year.

Additionally, Nadji points to a number of “overlooked markets,” such as Detroit, Milwaukee, Indianapolis, Chicago (which, he says, is being punished because of the Midwest stigma) and Portland, Ore. These are markets that don’t typically see much investor interest, “but if you take a hard look at them, they are, in many ways, the diamonds in the rough,” he explains.

Looking ahead

While none of the industry experts believe any apartment market should be avoided completely, they acknowledge that some markets do present better investment opportunities than others. Again, they differ in opinion about which markets these might be.

“A lot of investors are focusing their attention now on what we would call ‘primary markets,’” including New York, Los Angeles, Chicago, Washington, D.C., Houston, San Francisco and Boston, notes Nechayev. “That’s where you see a lot of apartment sales taking place right now; sales are shifting to primary markets and a little bit away from secondary and tertiary markets.”

However, because of the resulting pressure on pricing, capital may begin to look at somewhat lower-quality assets—Class B and B- product in the best markets—as well as those assets further from the core, observes Nadji. “As the risk appetite grows and the spread between the top-tier properties and the Class B/B- properties really steer investors toward the higher yield, you’re going to see capital start to move out a little bit,” he says. Still, he doesn’t expect Class C assets or tertiary markets to benefit much in 2012. “It’s a migration of capital down the quality chain—but not too far,” he asserts.

According to Vaghefi, 2011 saw a lot of activity in Boston, New York, D.C., Seattle, San Francisco, Southern California and South Florida, where pricing has increased and cap rates are “about as low as we’ve seen them,” in the 4 percent range, and in some cases, even in the 3 percent range.

Consequently, a lot of investors are starting to look at secondary markets, Vaghefi reports. Even markets that investors had once shied away from—Charlotte, Raleigh, Atlanta, Dallas and Houston, due to an overabundance of new supply—are seeing strong job recovery and are being driven by the healthcare, biomedical, technology and energy sectors. He adds that Phoenix has also seen a strong “return on investor appetite” and Portland, Ore. is back in favor, with an overflow of jobs coming from Northern California.

CBRE’s Nechayev adds that there are potentially sound investment opportunities over the next five years in some secondary and tertiary markets.

“If someone is looking longer-term, then perhaps primary markets can still be good bets,” he notes, “but given where pricing is today, secondary and tertiary markets will likely create more of these opportunities, as their expected performance is not that much different, on average, from the primary markets when you look at components of returns,” for example.

Additionally, Vaghefi predicts that investors will begin to shift their interest from urban to suburban assets, as they may be able to get a little more yield.

As for the more overbuilt markets—Severino calls to mind Las Vegas and Jacksonville, Fla. as examples—even if the supply-demand dynamics improve, “people need to be more discriminating,” he says. “If you’re a real risk-seeker, there can be interesting opportunities. You need to be really prepared to take a big risk in markets like that because they do have elevated vacancies and a supply overhang, and rent growth is not nearly as dynamic in those markets as it is in some of the supply-constrained markets.”

And because of the pressure on pricing, development is expected to ramp up. “In a lot of those metros that are fairly supply-constrained it’s a little bit of a challenge to build, and it’s not cheap to build, but a lot of people are doing the math” and discovering it’s more expensive now to buy, Severino adds.

While Nadji agrees that it’s a great time for development, he cautions that there could be pockets of overbuilding as early as 2013 or 2014.

Reprint from Multifamily Housing News              By Erika Schnitzer, Managing Editor

Seven of the 20 regions were able to avoid price declines in July over June, though one of them — Tampa — didn’t post a rise either, as its prices were flat. Gainers were led by Minneapolis with a 1.3% rise.

The other month-to-month gainers included Atlanta, Boston, Dallas, Denver and Minneapolis, all of which have reported positive returns for three months or more. Detroit also joined the group with a 0.6% rise. But Charlotte, which had four consecutive months of month-to-month gains until July, slipped into the red with a 0.2% decline. Dallas is now the only area to have five consecutive months of month-to-month growth.

Month-to-month decliners were led by Las Vegas and Phoenix, which slid 2.8% and 2.7%, respectively.

Las Vegas, Phoenix and Miami again posted the largest year-over-year drops, all posting declines in excess of 28%.

• See  the full S&P/Case-Shiller report.
• Read full story: Home Prices Continue to DeclineBelow, see data from the 20 metro areas Case-Shiller tracks, sortable by name, level, and year-over-year change — just click the column headers to re-sort. (About the numbers: The Case Shiller indices have a base value of 100 in January 2000. So a current index value of 150 translates to a 50% appreciation rate since January 2000 for a typical home located within the metro market.)
  

  Metro Area	July 2008	Change from June	Year-over-year change
  Atlanta	125.23	0.4%	-8.2%
  Boston	162.58	0.2%	-5.4%
  Charlotte	133.20	-0.2%	-1.8%
  Chicago	149.60	-0.4%	-10%
  Cleveland	109.35	-0.3%	-7.8%
  Dallas	123.16	0.6%	-2.5%
  Denver	132.67	0.8%	-4.7%
  Detroit	93.21	0.6%	-16.7%
  Las Vegas	154.15	-2.8%	-29.9%
  Los Angeles	192.55	-1.6%	-26.2%
  Miami	186.84	-1.6%	-28.2%
  Minneapolis	143.43	1.3%	-13.1%
  New York	192.92	-0.8%	-7.4%
  Phoenix	149.09	-2.7%	-29.3%
  Portland	174.21	-0.5%	-6.6%
  San Diego	172.20	-1.8%	-25.0%
  San Francisco	156.88	-1.8%	-24.8%
  Seattle	176.51	-1.0%	-8.2%
  Tampa	175.07	0.0%	-19.4%
  Washington	195.49	-0.8%	-15.8%

  Source: Standard & Poor’s and FiservData

After decades of fits and starts, Houston is pushing forward with plans to move Trinity water nearly 30 miles to Lake Houston. The reservoir, located on the smaller San Jacinto River, fills the taps for millions of people in the region.

Planners say the Luce Bayou project, a nearly $300 million pipeline and canal, would provide water to the ever-swelling city and suburbs while helping with the area’s planned conversion from groundwater. The newly adopted state water plan identifies it among the key strategies to slake the region’s thirst in 2060.

While population growth and a wicked drought boost the prospects for the mega-plumbing job, critics are asking how much water does Houston need. To their dismay, the answer is always the same: More than it has.

The project, they say, could invite too much growth, encourage more transfers from water-rich East Texas and damage native habitats along the Trinity and in the bay.

“This project is a game changer,” said Brandt Mannchen, of the Sierra Club‘s Houston group.

Interbasin transfers of water to meet growing demands are not new to Texas, but the strategy will become more prevalent in the future. The new state plan, for example, includes a $2.4 billion effort to move water from a reservoir on the Sabine River to the sprawling Dallas and Fort Worth area, which is in the Trinity River basin.

A longtime dream

The Luce Bayou project has been a dream of water planners for decades. A task force first identified the meandering stream as a way to provide Trinity water to Houston in the 1930s.

Two decades later, the city obtained a permit that allows the transfer of up to 940,000 acre-feet of water from the Trinity to the San Jacinto River basin each year. One-acre foot, equal to about 326,000 gallons, is enough to serve two typical Texas families for a year.

In the 1960s, Houston built a pumping station and canal system to send a portion of the water to purification plants on the east and southeast sides of the city. Still, the city never has fully utilized its rights to Trinity water.

Luce Bayou resurfaced as an option for moving more water westward in the early 1980s, but the project stalled in part because of a sagging economy.

Since then, the proposal has changed significantly, with the Trinity water no longer flowing through the natural channel to reach Lake Houston. The surge of new water would have caused flooding and wiped out natural features along the path of the stream, said Donald Ripley, executive director of the Coastal Water Authority, a quasi-governmental body that is developing the project for the city of Houston.

“It is clear that plan was not environmentally sensitive,” Ripley said. “If we had asked for a permit on that application today, it would have been dead on arrival.”

Now, from a proposed pumping station on the Trinity, just north of the Liberty County town of Dayton, the water would flow about four miles by pipeline to a settling basin. From there, it would travel 24 miles under gravity by a high-banked, earthen canal to Lake Houston.

The proposed project would harm 200 acres of protected wetlands, mostly bottomland hardwood forest. To offset the damage, the water authority has purchased a nearby 3,000-acre tract for the Trinity River National Wildlife Refuge.

As primary steward of the nation’s wetlands, the Army Corps of Engineers is studying the project’s potential environmental impacts. A draft analysis should be complete in early 2012, said Sandra Arnold, a Corps spokeswoman.

If the project meets the Corps’ requirements, the federal agency would grant a wetlands permit, which often is the most significant obstacle to building. The Coastal Water Authority’s Ripley said the pipeline and canal are on a schedule to be completed by 2020.

Luce Bayou would deliver up to 450,000 acre-feet of water a year. The city of Houston already has agreements to sell some of the new supply to water districts in north and west Harris County and Fort Bend County.

Enough conservation?

The push comes amid state forecasts showing the 15-county Houston region growing from 6 million people to 11 million during the next half-century.

The new state water plan also identifies five new major reservoirs by 2060 to provide enough water for the region in times of drought.

Critics say the state plan promotes more pumps, pipes, dams and canals ahead of saving existing water. Although the plan calls for 12 percent of the supply in 2060 to come from conservation, they say more could be done.

With Luce Bayou, “we will have capacity well into the future,” said Jim Lester, a water policy expert at the Houston Advanced Research Center. “My fundamental problem with this is, we are doing so little on conservation.”

The Sierra Club’s Mannchen said the project continues an endless cycle of increasing water supply to meet growing demands. Eventually, Houston may be forced to go farther east to grab water from the Neches or Sabine, he said.

Another concern is the potential impact on one of the nation’s most productive and commercially valuable bay and estuary systems.

Both the Trinity and San Jacinto Rivers empty into Galveston Bay, but at different points. The bay’s northernmost lobe likely will become saltier with less water from the Trinity, experts said.

Although it is unclear how the Luce Bayou plan would alter the bay, the key will be to avoid prolonged drought conditions because of management decisions, said Myron Hess, manager of the National Wildlife Federation‘s Texas water program.

While water transfers between basins make use of existing supplies, Hess said, “you need to ask if it is water you can afford to take.”

Reprint from the Houston Chronicle               By Matthew Tresaugue

Electronic locks are the future.  They provide a myriad of benefits to commercial multifamily property owners.  New developments with on-site management must consider the benefits of electronic locks.  But then there is everyone else; those with assets new and old that have 100 year-old technology (older really)- the lock and key. 

Many multifamily communities fall in to one of two categories; one lock per door or two locks per door.  Surprisingly, safety is seldom the determinant.  The decision on locks-per-door was decided by the builder or architect.  The developer selected one lock as a costs conscience action.  The architect is looking at functionality and “design”.  Read anything about safety in this description? Nope.

Locks represent the ultimate  “weakest link” theory, whereas, the weakest link is always the first to break down.   As property manager, it is your job to strengthen any and all weak systems.  The beginning point for selecting locks is to perform an assessment of the in-place lock and safety systems.  Are they appropriate, are they functional considering the multifamily assets and the placement of the asset within the community?  

Are Keys Secure?

The first order of business is to know without question the where-abouts of every master key.  One lost master key can mean thousands of dollars in re-keying expenses. 

• Is there a schedule for checking the whereabouts of master keys? 
• Are they accounted for when there is  personnel turnover?  
• Are master keys stamped with “do not duplicate”?
• Are individual unit keys (extra keys and those for vacants) under lock?  

 Do they work?

Do they work?  Locks are like the heat shield system on the Space Shuttle- they either work or they don’t.  There is no second chance when put to the test.   Granted, locks  are not designed to withstand an assault on the entire entryway.  But they should function as a deterrent to easy entry by unknown parties. 

 Is their a uniform brand?

When selecting locks aim for uniformity in quality and brand.  Larger properties, or property management companies, will have equipment for re-keying  on-site or at a central maintenance facility so it just makes sense to utilize a single make and model.   This is also a step towards controlling expenses when implemented.  The initial costs will have a positive return on investment for long-term owners. 

Locks and keys is one operational area where the low cost bid could be a negative.  Consider buying a third-party opinion from a locksmith; having a locksmith perform an assessment for a flat fee.  You may be surprised at the findings.

Reprint from Multifamily Insite          by John Wilhoit Jr.

What would a multi-family world without Fannie and Freddie look like? Speakers at a panel preceding the New York Housing Conference and National Housing Conference’s 38th Annual Awards Programs recently contemplated the possibilities and made the case for continued government involvement in multi-family financing. Panelists concluded that affordable housing may not obtain well priced financing, or any financing at all, if the government support for rental housing in the secondary markets disappeared altogether.

If they have not already done so, multi-housing players will definitely have to expect a future with a substantially changed financing system. Congress is not endorsing the survival of Fannie and Freddie, affirmed Ethan Handelman, NHC vice president. “That is off the table,” he said. All observers agree that the financing system undergird by Fannie Mae and Freddie Mac currently will “change significantly,” said Handelman. There is consensus, on the other hand, that FHA programs work well and should be kept.

Handelman said that while Congress may continue to criticize the two agencies in the next two years, however, no action will likely be taken until after the 2012 elections.

In his presentation on the history of the GSEs, Shekar Narasimhan, managing partner of Beekman Advisors Inc., reminded the audience that the reason the government developed GSE support for multi-family housing after it did so for single-family housing “had everything to do with” supplying affordable housing. Many renters are the ones that have no choice but to rent, he noted.

Because of stricter underwriting standards, the rate of defaults for multi-family housing financed by Fannie and Freddie are much lower than that for single family housing. Narasimhan noted that GSE multi-family investments are the best performing of all asset classes because of the way GSEs underwrite their multi-family loans.

Richard Froehlich, COO and general counsel of NYC Housing Development Corp., said that 90 percent of the agency’s long-term bonds issued for New York mixed-income housing are credit enhanced by Fannie or Freddie. “They play a very important role in mixed-income housing,” said Froehlich. Fannie and Freddie are also an important source of financing for the distressed portfolio that the agency tries to reposition, and for larger transactions of more than $25 million to $40 million.

Vincent R. Toye, managing director, GSE head of production for Wells Fargo Multifamily Capital, said his bank is seeing more five-year, floating-rate transactions as there are fewer banks willing to hold longer-term, 10-year, loans on their books. The disappearance of the GSEs will hit the rest of the country harder than New York City, he added.

The nation may also kiss goodbye to government mandates for affordable housing without the support of the government in the secondary markets. Richard Gerwitz, managing director, Citi Community Capital, noted that Fannie and Freddie financing enables the institution to sell its loans into the secondary market and thus help it make more CRA loans. The banks in New York City have a “tremendous amount” of need to satisfy CRA requirements. “We are all running like chipmunks after affordable housing.”

The point was raised that that commercial real estate is functioning without the benefit of either Fannie or Freddie. That sector is served by banks, insurance companies and CMBS conduits. But life insurance loans for example are provided at higher cost and lower leverage.

Bond securities investors would also demand higher returns if the loans are not backed by Fannie or Freddie. Toye asserted that institutional investors and banks may be willing to buy 10-year paper, “but not at the rates at which they buy them today” with Fannie and Freddie in the market. If they can be priced, banks may be willing to hold longer term 10-year, 15-year paper, “but you may not like the price I have.”

In response to a question from the audience, Narasimhan said that mortgage-backed securities guarantees cannot be provided purely by the private sector for two reasons. A government “wrap” is needed, he said, for affordable housing, and in times of crisis as a counter-cyclical play. If a government guarantee is needed for the mortgage backed securities, that entails complex legislation and regulations, as is the case today.

Ultimately, in the case of multi-family financing, there is no question government involvement is needed in the secondary market to keep financing costs low for rental housing and allow the nation to meet affordable rental housing objectives.

Reprint from Commercial Property Executive   cpexecutive.com

By Keat Foong, Contributing Editor

The broker representing the seller had difficulty getting the seller to sign documents.  The seller had difficulty making mortgage payments.  The property needed extensive repairs because seller was out of state and did not personally see the property.  The first year it was for sale on the market and had four vacancies due to needed repairs. 

It needed a new roof also.  Two years previously the Appraisal District had each apartment unit appraised for approx $42,000 but dropped the value this year to approx $29,000 each.

The buyer’s lender assigned the file to an inexperienced loan processor, who promised that the appraiser would finish the appraisale in one week.  The project was assigned to an appraiser just two weeks from the expected closing date, however it took three to get the appraisal finished and then the bank needed an additional week to review the appraisal and write loan docs.