Industry insights, market outlook reports and commercial real estate
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The U.S. is facing a potential loss of nearly 200,000 affordable housing units in the next five years as government protections expire for hundreds of rental properties, allowing landlords to set their own rents, highlighted by The Wall Street Journal. The main program used by the federal government to encourage developers to build affordable housing is a 30-year tax credit. However, specific agreements that assisted low-income renters are set to end, giving landlords the option to charge market rates for their units instead of continuing with the government program. Due to a period of high rent growth, many landlords are expected to raise rents significantly. Between early 2021 and the summer of 2022, asking rents for market-rate units increased by 25%, according to Apartment List, a rentals website. By 2027, up to 188,000 low-cost rental apartments funded by the government tax credit could convert to market rate, as reported by Moody's Analytics. Certain cities, such as Dallas, Chicago, and Houston, are at risk of losing a significant portion of their affordable housing. During the pandemic, a considerable number of affordable housing units vanished, with a decline of 400,000 apartments and rental homes for families in poverty between 2019 and 2021, according to the National Low Income Housing Coalition, which analyzed U.S. census data. Some of this loss was attributed to the expiration of tax credits, as mentioned by Moody's Analytics.Without longer affordability agreements or new subsidies, approximately 100,000 units of tax-credit housing could expire annually by 2033, according to Peter Lawrence, director of public policy and government. Rent increases following expiration can be substantial, as affordable housing rents are typically 38% below market rates on average, but after expiration, they rise to about the same level as market-rate properties of comparable quality and location, according to a study by Freddie Mac.This situation has left some long-term renters in difficult situations. The Wall Street Journal article shares the story of an 85-year-old renter in California who lives on a monthly income of $1,000 and has experienced minimal rent increases for nearly three decades. However, in 2021, the landlord opted out of the federal tax credit program, causing the rent to more than double, going up to as much as $1,300. Landlords have been major supporters of the tax credit program, and many have built large businesses by operating affordable housing. But without new subsidies or incentives, building owners will likely take advantage of the recent hot market and raise rents to meet the rising costs of maintenance, insurance, and property taxes. The solutions to this looming challenge will require cities and government agencies to work with landlords and developers to encourage investment into affordable housing projects, while simultaneously creating the incentives to do so. It is a complex situation that won’t easily be solved but without collaboration to address the need, it is clear that fewer options will be available. That doesn’t bode well for the future of many who are in desperate need and could end up without a safe and secure place to live.
The second in our "Beyond the Bricks and Mortar" series with our Board of Advisors. We are joined by Bob Fredrickson, President of CBC Danforth in Washington State. Bob digs deep into the idea that Simplicity is genius in CRE. He talks about his approach to the business, how a new agent can find success early, and how seasoned agents can earn more business. Focusing on relatinonships and shifting your focus from what you have always done, to where the opportunity will be 2 years from now. A true professional in the field, tune in to hear Bob's wisdom and tactics to grow your business and skill.
EVERETT, WASH. (Sept. 13, 2023) – Coldwell Banker Commercial Danforth recently completed the $14.7 million sale of an industrial park in Everett, Wash. The brokerage represented buyer Mina Properties VIII, one of its long-term investor clients. The seller was BFS Operations LLC.Occupying 31.6 acres at 3200 35th Ave. NE, the park consists of four buildings totaling 94,000 square feet. With easy access to both I-5 and SR 529, the location provides easy access to ports, cities, and towns along the I-5 corridor, only nine minutes from downtown Everett and 38 miles from Seattle.Broker Michael Fear said that Mina Properties VIII intends to maintain the property as a multi-tenant investment. The seller was BFS Operations LLC.“This property went into contract quickly after listing, with multiple local and national prospective buyers,” said Fear. “The size and proximity to a strong industrial market with highway, port, and railroad access made this property desirable.”For further information, contact commercial broker Michael Fear at email@example.com | 206-755-8856, or Bob Fredrickson, CCIM, president of Coldwell Banker Commercial Danforth, at firstname.lastname@example.org | 206-595-7232.About Coldwell Banker Commercial AffiliatesColdwell Banker Commercial Danforth, an affiliate of Coldwell Banker Commercial®, provides commercial real estate solutions serving the needs of owners and occupiers in the leasing, acquisition, and disposition of all property types. With a collaborative network of independently owned and operated affiliates, the Coldwell Banker Commercial organization comprises almost 200 companies and more than 3,000 professionals throughout the U.S. and internationally. For additional information, visit www.cbcworldwide.com. Media Contact: Kevin GuhlEmail: email@example.comPhone: 973-407-5916
Numerous office buildings remain largely vacant. The once rapid growth of apartment rent has decelerated and is even declining in certain areas. However, within the struggling commercial real estate industry, there is a rare positive aspect seen in housing aimed at college students attending popular universities.The rental rates for student housing are anticipated to increase due to limited availability and substantial demand at various colleges, particularly those prestigious research universities and schools affiliated with the top five highest-earning athletic conferences in U.S. college football. Nonetheless, as overall college enrollment experiences a decline, there are heightened risks for student housing, particularly in smaller colleges with less renown and diminishing enrollment, as highlighted by The Wall Street Journal.Despite the increase in mortgage rates over the past year, sales of student housing properties reached an all-time high of $22.9 billion in 2022. In contrast, the growth in multifamily rents is showing signs of cooling down from the double-digit surges observed in the previous year, with an increase of 2.3% over the 12 months ending in May 2023, as reported by RealPage. Meanwhile, student housing rents are experiencing growth at a rate of approximately 9%, according to RealPage.The COVID-19 pandemic served as a unique test for the resilience of student housing in challenging markets. Despite expectations of a downturn in 2020, occupancy rates remained stable, even during the peak of online learning. Students displayed a desire to move closer to their college campuses, even when attending classes virtually, instead of staying with their parents. The uncertainty surrounding the return to on-campus learning had a dampening effect on rental rates until the latter half of 2021, at which point they began to rise again. The combination of bustling campuses and increasing rental rates contributed to the record sales observed last year.It is predicted that sales of student housing properties this year will likely not reach the levels seen in 2022, partly due to the pent-up demand that drove sales in the previous year. While the values of student housing properties, like other commercial real estate types, have been affected by higher borrowing costs, the decline in value has been comparatively moderate. This is attributed to the robust growth in rent and sustained occupancy rates. Industry experts, including Blackstone, have expressed confidence in the enduring strength of this sector, stating that it has proven resilient over time and is likely to remain a positive prospect in the future. Blackstone backed this up by acquiring American Campus Communities for $12.8 billion. While the market is challenging right now, it’s interesting to note the steadiness and success of student housing despite the market’s current volatility. Additionally, supply constraints resulting from a lack of available sites at certain schools will further empower landlords to continue raising rental rates.
On this episode with Dan Spiegel, Managing Director of Coldwell Banker Commercial, we discuss that even though there are concerns over the economy and differences in pricing expectations, CRE activity is still happening, while we dig into CBC’s newly published Midyear Outlook.
On this August ICYMI episode, we recognize some of our top professionals both for production as well as their engagement across social media. We highlight a new firm that has joined CBC, share information on upcoming CRE industry events, discuss new product updates and much more!
With soaring home prices and the peak rental season in full swing, renting has emerged as the contemporary alternative to buying. However, among the cities experiencing heightened listing activity, which ones are drawing the greatest attention from apartment seekers? According to research by RentCafe, Arlington, VA, retained its position as the most coveted city among renters for the month of August, maintaining its dominance from the previous month. Climbing three places from its July ranking of No. 5, Kansas City, MO, secures second spot. Minneapolis and Cincinnati, both situated in the Midwest, secure the third and fourth positions, respectively. Meanwhile, Denver secures the fifth position, marking a significant jump of six places since the previous month. The apartment listings in these cities garnered the highest engagement on RentCafe.com this month. This heightened engagement can be attributed to a combination of factors, including a substantial number of rental properties being saved to favorites, personalized search activity, limited unit availability, and a notably high volume of listing views overall.The Midwest significantly asserts its influence by securing ten out of the top 30 cities with the highest rental activity in August. A significant number of individuals are gravitating toward the Midwest, attracted by its affordable cost of living, expansive open spaces, and relaxed pace of life. The region is known for its friendly residents, economical land prices, and a tranquil lifestyle distinct from other parts of the United States, which has enticed a range of people to trade life on either Coast for the Midwest. The South follows closely with nine cities on the list. Concurrently, as the peak rental season unfolds, renters are shifting their apartment search focus towards suburban localities that provide convenient access to urban amenities. This shift has propelled Phoenix suburbs—Chandler, Gilbert, and Peoria—into the ranking as the freshest and most sought-after rental locations. Consequently, this month showcases the inclusion of seven Western cities in the roster of the nation's most desired renting destinations.However, the appeal of core urban living remains strong. In a remarkable advancement, New York City's Bronx ascends three places to occupy the No. 6 spot, edging ever closer to the top. Not to be overshadowed, Queens, the largest borough of NYC, follows suit, securing the No. 13 position this month—an impressive climb of six places from the prior month. Similarly, Philadelphia, Chicago, and Houston continue their sustained presence among the nation's premier cities for rental activity.Staying informed about the cities in the highest demand for renters is a crucial undertaking for investors. This knowledge empowers investors to make well-informed decisions that align with current market trends and capitalize on lucrative opportunities.
While the overall economy has proven to be resilient to interest rate increases, the gap between buyers and sellers on cap rates is still pretty significant, which has resulted in lower transaction volumes compared to the prior year. In conversations with Coldwell Banker Commercial professionals across the country, only a few markets are seeing sellers come down on pricing to meet buyers’ expectations and create deal terms that make sense in a higher interest rate environment. The majority of property owners prefer to hold on to their assets hoping for increased valuations over last year. Buyers are trying to put deals together but believe pricing should be 10-15% less than what sellers are asking for. Properties will move only if priced right, and even then, deals are slower to close (which is an improvement from the “no-decision” days of last year). While real estate is still a desired asset class, nervousness about timing is holding buyers back. A slowing domestic economy, rising interest rates with an uncertain end and the war in Ukraine has led many investors to park their money in risk-free bonds while they wait for values to come down. Cap rate spread over 10-year US treasury yields are below historic average spreads across all property types.
On this episode, we are joined by Kate Conquest, National VP of Affiliate Servicing for Coldwell Banker and Coldwell Banker Commercial. She is determined and committed to helping her affiliates achieve exceptional results using a well-developed market intelligence based approach. Growth is one of her passions and she is driven by being a part of something bigger than herself. She has been an advocate for NAR and why being involved at that level is pivotal for one’s business as well as the industry as a whole. Hearing the excitement for the real estate industry from this leader is sure to inspire.
The primary contributor to the increasing cost of living for Americans are expenses associated with rent and mortgages, making it important to consider which cities offer the powerful combination of affordability and quality of life in 2023. It’s important to factor in a city’s apartment quality; local economy; employment opportunities, living expenses, traffic; schools, air quality, and natural amenities when making the difficult decision to plant roots in a new place. New data by RentCafe highlights where people living in the U.S. can get the most out of their renting experience in 2023. According to RentCafe, Southern states are the premier region for renters, claiming an impressive 36 out of the top 50 spots. This includes renowned rental hotspots like Miami and Orlando, FL, as well as lesser-known markets such as Plano, TX; Asheville, NC; and Birmingham, AL. Renters in this region have the luxury of choosing between the vibrant ambiance of a major city or the enchantment of a charming small town. Charleston, SC takes the No. 1 spot for Best Places to Live in 2023Charleston, South Carolina, the largest and oldest city in the state, secures the top spot in this year's ranking of the best cities for renters. This accolade is attributed to its optimal combination of apartment quality and cost of living, which ranks as the third-best in the country. Additionally, Charleston earns a commendable score in the local economy category. Notably, the city has gained recognition as a burgeoning tech hub with over 250 tech companies, positioning it fifth in terms of the local economy.Renters in Charleston can enjoy a suburban feel that offers the advantages of residing in a major city without compromising on factors like air quality or access to natural amenities. The data reveals that nearly half of the households in Charleston are occupied by renters. Furthermore, the average size of apartments in Charleston is significantly larger than the national average, measuring approximately 967 square feet. With a robust job growth rate of 5.9%, it is no surprise that Charleston claims the title of the best city for renters in 2023.Plano, Texas rises to the top in 2nd place Claiming the second spot on RentCafe’s list, Plano has recently gained recognition as the "City of Excellence." It garners high rankings in two key areas: the local economy, where it secures the second position, and quality of life, where it ranks sixth. Plano's distinguished reputation for fostering academic success makes it an ideal destination for families seeking a city with exceptional public schools. Furthermore, the city boasts excellent air quality and a significant proportion of high-end apartments, accounting for 78.2% of the housing stock. Additionally, Plano serves as the headquarters for several major corporations, including Bank of America, Hewlett Packard, FedEx, JCPenney, and Pepsi. Consequently, it exhibits one of the highest job growth rates nationwide, further enhancing its appeal.The Top 10 Places to Live in 2023 For commercial real estate investors, understanding the dynamics of the rental market and the best cities for renters in 2023 is crucial. With the rising cost of living, particularly in terms of rent and mortgages, it becomes essential to identify cities that offer a compelling blend of affordability and quality of life. As RentCafe's data shows, Southern states have emerged as the premier region for renters, occupying the majority of the top 50 spots. This presents a compelling case study for commercial real estate investors looking to tap into rental markets with strong potential.