Is proximity to mass transit becoming less of a draw for apartment renters?

In the few years since companies like Uber and Lyft began to offer their ride sharing and carpooling options to riders in San Francisco, the premium earned by apartments near mass transit has dropped.

Apartment dwellers have traditionally been willing to pay a premium to live near mass transit stops in urban markets. But fueled by the proliferation of ride-sharing services, a rise in use of electric vehicles and other factors, that allure has begun to lessen in the Golden Gate City and that effect could spread elsewhere, according to new findings from MetLife Investment Management.

“When we look at what makes real estate assets most attractive to tenants, access to transit has traditionally been near the top of the list,” says Adam Ruggiero, head of real estate research for MetLife, which recently released its new report, “On the Road Again: How Advances in Transportation Are Shaping the Future of Real Estate.”

Apartment renters have more options to get around, which may be diluting the amount of extra rent that they are willing to pay to live near a subway stop or light rail station. In the few years since companies like Uber and Lyft began to offer their ride sharing and carpooling options to riders in San Francisco, the premium earned by apartments near mass transit has dropped—but not disappeared.

“It might lower the spread but it does not erase the spread,” says Justin Bakst, director of capital markets for CoStar Risk Analytics, which provided data for the MetLife report.

The introduction of ride sharing and carpooling services in San Francisco coincided with a decline in rental premiums for on-transit apartments (defined properties within a five-minute walk of a transit stop) from a historical average of 20 percent to only 15 percent today, according to the MetLife report

 

Read more from National Real Estate Investor

 

 

San Jose mixed-use apartments eyed west of Google village

Plans for a mixed-use apartment and retail complex have sprouted west of downtown San Jose, a development that would bring more than 100 residences to an area known as the Midtown district.

The proposed development at 259 Meridian Ave. near West San Carlos Street would consist of 110 to 120 residential units and 2,300 square feet of retail, according to documents on file with San Jose city planners.

“The city has been encouraging development within an urban village planning process for this area,” said Jerry Strangis, a principal executive with Strangis Properties, a realty firm that is the project consultant for the development. Strangis wouldn’t identify the principal developer of the property.

 

Read more from The Mercury News

 

 

San Jose makes changes to housing policy

The San Jose City Council voted to allow landlords to evict tenants convicted of violent felonies.

As development in San Jose explodes and housing prices continue to soar, the City Council on Tuesday night adopted changes to the city’s housing policies that could benefit renters and provide protections for landlords.

At the Housing Department’s recommendation, the council agreed to prohibit landlords of rent-controlled apartments from dividing utility costs based on how many people live in each apartment and the unit’s size rather than how much gas or electricity they actually use. So the council is asking property owners to install sub meters at each apartment so families are charged only for what they actually use.

The council also tweaked the tenant protection ordinance it adopted last year, and will now prevent landlords from threatening to share information about their tenants’ immigration status with immigration authorities.

The city also will let landlords evict tenants with serious or violent felonies. Acknowledging concerns about the displacement of families, landlords must give renters a chance to evict such felons before ousting an entire family. Mayor Sam Liccardo supported the idea, and asked the city to provide an exception for children convicted of such crimes.

Also up for debate was an issue around the Ellis Act, which outlines when and how the owners of some rent-controlled apartments in the city — generally those built before September 1979 — can take them off the market.

Read more from The Mercury News

How to Find Continued Value in Apartment Acquisitions

With concessions ticking up and rent growth slowing, is it time to question or finetune allocation levels and strategies in multifamily investing?

The stability, durability and continued capital flows into multifamily investing permeate today’s headlines, with industry pundits believing apartments to be the most popular product type with real estate investors in 2018, second only to industrial. Mixed signals abound among varying markets, and it’s important to dissect and triangulate the real data as the analytics don’t always tell the full story.

A first quarter report from Fannie Mae cited:

  • Positive, but slowing net absorption in 2018 compared with 2017 (CoStar)
  • Surging apartment development, peaking at over 440,000 units nationwide and up 16 percent from 2017 (Dodge Data & Analytics)
  • Rising nationwide vacancy rate predicted to approach recent historical average of six percent by year-end (Fannie Mae)

With concessions ticking up and rent growth slowing, is it time to question or finetune allocation levels and strategies in multifamily investing? Two principal factors are worthy of consideration here: geography and investment horizon.

Nationally, development is projected to keep pace with net absorption, as Fannie Mae projects net rental demand of 380,000 to 460,000 units in 2018. However, parsing geographies more discerningly reveals that new multifamily construction has been heavily concentrated in America’s largest cities, where pockets of oversupply are projected. New York, Boston, Washington, D.C., Chicago, Los Angeles and San Francisco present some of the highest unit construction per capita in the country, yet are all projected by Moody’s Analytics to experience job growth in 2018 that lags the national forecast of 1.5 percent.

All markets do not bear these metrics though, especially in select secondary markets where Fannie Mae reports the ratio of projected population and employment growth to rising apartment inventory is more favorable. Cities such as Houston, Dallas, Austin, Texas, Salt Lake City and Portland, Ore., even while seeing brisk construction, are forecast to increase job growth between two to three percent amid continued rental escalation. Two markets worth investigating include Phoenix, where projected 2.6 percent employment growth forecasts the demand for 10,000 units against projected 2018 delivery of 8,000 units, and Las Vegas, where projected 2018 absorption is double the number of units under construction.

Development nationwide should peak in 2018, as planned units in comparison to those under construction taper off, even in cities with the most active pipelines. This suggests that investors with a longer hold horizon may see their patience rewarded when new supply is absorbed and vacancy rates level off. Several long-term demographic trends also bode well for multifamily absorption and rental rates:

  • Householders continue to delay marriage and childbirth, thus tending to remain in apartments
  • Population growth in many areas, particularly in the Southwest, is being fueled by immigrants who tend to be renters
  • Real household income growth is occurring only in the upper 20 percent of earners, rendering home ownership less affordable for many
  • Student loan debt, which doubled as a percentage of GDP between 2006 and 2012, stymies home ownership for younger households
  • Conversely, the 65+ baby boomer generation, America’s most rapidly growing domestic cohort, is demanding more rental housing as they age out of owned homes and reevaluate their investment and retirement options

In our view, investors who choose their geographies wisely and take a long-game approach should see their properly selected multifamily investments buoyed by these market and demographic trends, while enjoying relatively predictable cash flows in the interim.

Read more from National Real Estate Investor

 

San Francisco’s largest office landlord to break ground on $265 million Oakland tower

Boston Properties, San Francisco’s largest office landlord, will break ground on May 2 on a 402-unit apartment tower next to Oakland’s MacArthur BART station.

The 260-foot project at 532 39th St. will be the tallest building in North Oakland and the company’s first residential project on the West Coast.

The project in the Temescal district will be among a half-dozen Oakland towers to start construction in the last two years, an unprecedented real estate boom that’s drawing some of the country’s biggest developers to the city. Other developers include Lennar Multifamily Communities, Shorenstein Properties and Carmel Partners.

Read more from San Francisco Business Times

 

 

Exclusive: FivePoint suspends work on 635,000-square-foot shopping mall at the former Candlestick Park

The mall was meant to be the centerpiece of the 280-acre project, one of San Francisco’s largest.

The shopping centerpiece of San Francisco’s 280-acre Candlestick Point development has been suspended amid turmoil in the retail industry, placing one of the city’s largest projects in jeopardy.

Developer FivePoint Holdings LLC and its retail partner Macerich Co. paused work on the 635,000-square-foot mall, according to a Thursday email to the project team obtained by the San Francisco Business Times.

FivePoint said in recent SEC filings that “in light of the rapidly evolving retail landscape,” it was “evaluating the viability of a mall” and “exploring potential alternative configurations of the site.” FivePoint said future plans were uncertain.

The mall was to span over a dozen buildings, bounded by Harney Way, Arelious Walker Way and Ingerson Avenue. It was approved along with 7,200 housing units, a 200-room hotel, and an additional 300,000 square feet commercial space. Infrastructure construction is underway at Candlestick, but no new buildings have started construction and design work is ongoing.

The mall was meant to revitalize the former home of the San Francisco 49ers and Giants, who played at Candlestick Park for four decades. The stadium was demolished in 2014, the same year that the mall project was unveiled and originally set to open in late 2017.

Read more from San Francisco Business Times

 

 

San Jose mayor counters Evergreen Senior Homes initiative with own proposal

Sam Liccardo is concerned the initiative could open San Jose to new sprawling development.

San Jose City Council’s strategy to fend off a ballot initiative over a development in Evergreen — one it fears could override its general plan for land use — is a ballot measure of its own.

But attorneys for the private residential developers behind an initiative backed by more than 35,000 signatures say the city’s gambit will lose in court.

“We will pursue litigation,” elections attorney Sean Welch warned the council on Tuesday as his microphone was silenced at the end of his two minutes’ speaking time.

Mayor Sam Liccardo’s last-minute agenda addition to put a rival measure on the June ballot to override the one from Ponderosa Homes and developer Carl Berg, which won its ballot place through a petition drive, is yet to win City Council approval. All 10 members present Tuesday voted to delay final consideration until 8:30am on Thursday.

Read more from Silicon Valley Business Journal

 

 

Smart tech becoming key to attracting renters

Tenants want more tech in their apartments and multifamily landlords and developers are putting in the technology to meet that demand.

While building-wide WiFi, electric chargers and rooftop decks remain popular among tenants, smart building technology is becoming the new “it” amenity.

From package delivery lockers to smart locks, landlords are turning to tech-enabled amenities to woo tenants who are willing to pay more for these features.

In a Schlage and Wakefield Research survey of 1,000 U.S. multifamily renters, 86% of millennials are willing to pay one-fifth more for a smart apartment. Gen Y renters are 61% more likely to rent a unit because of electronic access such as keyless entry, and 55% are willing to pay more in rent for a unit with a smart lock.

Smart lock systems, such as Latch, Kwikset, August Home, Schlage and Yale Locks & Hardware, are being installed in existing and new units throughout the country.

Read more from Bisnow

Ten-X: Bay Area Multifamily Top ‘Sell’ Markets In Country

This might be a good time to consider selling multifamily assets in the Bay Area.

San Francisco, San Jose and Oakland were listed as Ten-X’s top sell markets in its most recent U.S. Apartment Outlook report, which compared Q3 rents and vacancy rates to 2021 projections.

Bay Area cities are expected to face rising vacancies and flattening rent by 2021 following a flood of new supply from years of development. Ten-X’s models take into account a cyclical downturn in 2019-20 and a recovery by 2021.

San Francisco is particularly vulnerable to the cycle due to a heavy construction pipeline that is already impacting the market, according to Ten-X. Vacancy rates are at 4.5%, up 140 basis points from the cyclical low, and rates are expected to increase through 2020. Ten-X forecasts rents will contract by 7.5% over the recessionary period, which will result in severe net operating income declines.

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San Jose project would add offices, retail, 582 homes

Nearly 600 homes and about 300,000 square feet of offices would sprout in west San Jose on Stevens Creek Boulevard under a plan for a new urban village proposed by Fortbay, a Bay Area developer.

The project would be located at 4300 Stevens Creek Blvd., currently a low-slung complex with a collection of offices and retail.

“We feel the market out there is strong,” Tom deRegt, one of the principal executives with Fortbay, said in an interview Monday. “That’s why we are pushing ahead with this project and the urban village approach.”

The development would demolish the existing buildings on the site, which now has four office buildings and one retail building, according to a San Jose planning staff memo about the plan.

Read more from East Bay Times