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Multifamily News Roundup – Q1 2019
The first quarter of 2019 suffered no shortage of news stories in the commercial real estate and multifamily world. Below are four of the most significant stories so far this year.
Despite a delay of the report’s release due to the government shutdown, numbers made public in March revealed an 18.6% increase in housing starts from December to January. Contrasted with a weak December, these numbers indicate confidence on the part of builders that demand for new housing has strengthened. This January increase in the construction of new units, which includes single-family dwellings, manufactured homes, and multifamily, had some hopeful that demand for new housing generated by the formation of one million new households in 2018 might be met.
Weak February numbers, however, have some fearing that hopes for increased production in 2019 will not be met. Figures released later in March reflecting construction activity in February indicate an 8.7% decline in housing starts over January. This decrease is due to a decline in month-over-month starts in single-family housing, offsetting an increase in multifamily starts in the same time period. These numbers come despite relatively high wages, an overall healthy economy, and positive forecasts for 2019. The shutdown means economists and industry leaders do not yet have a full picture of Q1—expect March numbers in mid-April.
Rent Growth & Trends
Yardi data indicate that multifamily rents increased by $2 from January, rising to $1426. Demand for rental units remains high, thanks to wage growth and a stable, growing economy. Owners and operators are not the only ones benefiting from this stability: mortgage delinquencies were at a low point at the end of last year. Forecasters anticipate that delinquencies will remain low, barring an unexpected macroeconomic shakeup.
Another interesting rent-related fact emerged during Q1: senior citizens are renting apartments in multifamily properties at an unprecedented rate. Since 2007, the population of seniors who rent has grown by 43%. There are a few reasons for this uptick. Some households downsized after children left for college or graduated and moved away, or simply due to frustrations with the ups and downs of homeownership. Others may have had less of a choice, losing homes during the Great Recession, or losing the financial security that allowed them to continue paying a long-term mortgage.
JLL Acquires HFF
In a strategic move, JLL purchased Dallas-based capital market intermediary and commercial sales brokerage HFF in mid-March. JLL’s decision continues the trend of consolidation among commercial real estate companies, and follows the company’s 2008 acquisition of Staubach and 2011 acquisition of King Sturge. Other large-scale consolidation deals of the last few years include DTZ’s merger with Cushman & Wakefield, which came on the heels of DTZ’s acquisition of Cassidy Turley and Cushman’s purchase of Massey Knakal, then New York City’s leading investment sales brokerage, and Cushman’s subsequent purchase of Minneapolis-based Northmarq.
The HFF acquisition should strengthen JLL’s lending platform and cement JLL as a serious contender for largest brokerage in the United States, a position currently held by CBRE. The transaction will likely lead to shakeups in JLL’s hierarchy, with other firms attempting to poach top producers before the dust settles. The deal will close some time in the third quarter of 2019. Some question whether the combination of the two companies’ cultures will happen seamlessly, but the increase in transaction fees, particularly from greater exposure to the New York City market, should mitigate any pain that might arise.
The lack of construction in February will likely exacerbate the ongoing national affordability crisis, but the biggest news to come in the last few weeks is Oregon’s passage of affordable housing legislation.The law mandates no rent increases for properties 15 years or older, but it is unclear what long-term implications the law will have. One thing to watch out for is how Oregon’s new legislation influences other states. AB36, a new law proposed in California, resembles the Oregon law, with caps on year-over-year rent increases, and could be a harbinger of more to come.