residential forecast 2009 cindy clare, cpm president, kettler management january 27, 2009
TRANSCRIPT
Residential Forecast 2009Cindy Clare, CPM
President, Kettler Management
January 27, 2009
MARKET FOR 2009
• What a difference a year makes!
• Impact of the decline in the economy
• Impact of the election
• How will the credit crunch impact the apartment industry?
ECONOMY
• The implosion of the financial markets impacted everyone
• Renters are being more cautious, and much more price sensitive
• Renters are taking smaller units, but not doubling up “yet”
• Silver Lining – the bailout may bring more jobs to Washington
ELECTION
• The change in administration brought “hope” to the nation
• Immediate increase in leasing after the election
• Will it continue?
WHAT DOES THIS MEAN FOR RENTALS?
• Slower absorption pace at lease-up properties (average 15 per month) • Rental concessions will continue and will increase in 2009
• Increased vacancy in both product types • Limited to no rent growth in strong sub-markets, rent reductions in other sub-markets
2008 RENTAL RESULTS
• Vacancy increased in VA, MD, and DC
• Class A vacancy increased to 4.4%
• Small increase in rents of 1.3%, decrease in high-rise rents
• Class A absorption dropped from 17 to 15 units per month • There are currently 51 apartment communities in lease-up in the Washington Metropolitan Region
• Concessions continue to increase; Class A 5.7%
2008 RENTAL RESULTS
• Supply beginning to stabilize as reversions slow down and new construction is delayed
• Rentals in No. VA were up 1.5%
• Rentals in Rockville and Bethesda, MD were down 2.4%. However, rentals in Silver Spring, MD were up 5.1%
• Rentals in DC were down 0.7%
• Shadow market is not having as much impact in the outer suburbs
2009 RENTAL FORECAST – No. VA• Concessions will continue and will increase in all sub- markets. Additional spreading of concessions as absorption slows
• Rent growth is unlikely in any product type. Although there may be an opportunity to raise rents on particular unit types (smaller units)
• Vacancy will edge up everywhere
• Location and quality will be key for new product. Unique features will become increasingly important
• Properties located near mass transit will continue to hold up better than other product
• Pipeline may continue to be reduced as new construction is delayed due to lack of financing
• Turnover should slow as buyers will need more money down to buy. However, those that have cash may see 2009 as an “opportunity”
2009 RENTAL FORECAST - DC
• 25% increase in apartment supply in 2008 will impact occupancy in 2009
• There will not be rent growth
• Reversions will continue to impact the market and could affect absorption depending on timing
• Vacancy will increase slightly
• Concessions will continue to increase as lease-ups are introduced into the market
2009 RENTAL FORECAST - MD
• Concessions will increase and spreading of concessions will continue as absorption slows
• Rents will be flat
• Properties near mass transit and close in locations will do better than outlying suburbs
• Vacancy will continue to increase
2009 SUB-MARKET RECAP• Near-term pipeline is imposing but upon closer review some markets may perform better than others
• Currently Washington, D.C. itself is saturated with failed condo projects and new apartments
- Poor locations are forced to offer steep concessions, dragging down all new communities who are forced to match - Concessions and price cuts are bringing some communities inline with new product in Arlington—Ballpark vs. Pentagon City
• Most Fairfax County supply will be absorbed by the first half of 2010
• Arlington has been hard hit by condo reversions however virtually all of these projects will be leased up by early 2009
• Which will be followed by another 2,900 units delivering over the next 18 months—however most new deliveries are in secondary locations, many without Metro
ITEMS TO WATCH IN 2009
• Increase in delinquencies particularly in the B market
- Hold fast on credit standards in order to avoid the pitfalls of the “for sale” market
• “Let’s make a Deal” as absorption slows- Focus on retention of existing
residents
SUMMARY
• 2009 will be a slow market, but not a sharp decline
• The Washington Metro market will continue to be desirable due to a stronger economy than the majority of the country
• While the market will be declining from our standpoint, it is still much stronger than many areas of the country
THANK YOU