Hottest Multifamily Markets for 2011

[M II A II R II K]

Hottest Multifamily Markets for 2011


March 24, 2011

By Boyce Thompson

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Read More: http://www.builderonline.com/multifamily/hottest-multifamily-markets-for-2011.aspx#

Monthly multifamily permit activity has been gyrating like a teenage pop singer of late--rising 17% one month, only to fall 8% the next. Clearer patterns emerge from an analysis of year-long, 2010 permit data. That analysis shows where 2011 development activity is likely to be concentrated. Based on sharp permit increases in many major markets, it looks as though the long-vaunted rise in demographically favored multifamily construction may be close at hand. Some of the largest household growth in this country over the next ten years will be in the 25 to 34 age cohort that's most likely to rent apartments. On the other hand, multifamily construction has been running at such depressed levels that an increase in activity shouldn't be a surprise.

- With balance sheets improving and investors eager to make deals, the industry would appear to be in an ideal position to start new projects. If only the decision to build apartments were that easy. Owners and developers continually weigh the cost of building new apartments against buying older buildings and remodeling them, or even investing in their current buildings to potentially raise rents.

- Given that the big players in the multifamily market, publically held REITs, prefer to build in Class A coastal markets, it's no surprise that metro areas such as New York City, Los Angeles, and Washington, D.C. top the list of development hot spots in 2011. But activity is clearly picking up in other traditionally large apartment markets with strong business centers such as Houston and Chicago. An analysis of preliminary 2010 permit data, courtesy of U.S. Housing Markets, shows where developers are already placing their chips.


Rank--------------------Metro---------------------------------------------2010 Permits----------Increase/Decrease

1 New York-Wayne-White Plains NY-NJ (Div.) 8,305 +2%

2 Houston-Baytown-Sugar Land, TX (MSA) 5,169 +4%

3 Los Angeles-Long Beach-Glendale, CA (Div.) 4,784 +63%

4 Dallas-Plano-Irving, TX (Div.) 3,852 -15%

5 Seattle-Bellevue-Everett, WA 3,692 +57%

6 San Jose-Sunnyvale-Santa Clara, CA (MSA) 3,327 +622%

7 Washington-Arlington-Alexandria, DC-VA-MD-WVA (MSA)2,501 +16%

8 Chicago-Naperville-Joliet, IL (Div.) 2,361 +73%

9 Miami-Miami Beach-Kendall, FL (Div.) 2.265 +331%

10 Indianapolis, IN (MSA) 2.128 +15%

11 Tampa-St. Petersburg-Clearwater, FL (MSA) 2.105 -32%

12 Baltimore-Towson, MD (MSA) 2,067 +7%

13 Fayetteville, NC (MSA) 1,967 +131%

14 Minneapolis-St. Paul-Bloomington, MN-WI (MSA) 1,921 +85%

15 Edison, N.J. (Div.) 1,811 +167%

16 Boston-Quincy, MA (Div.) 1,792 +13%

17 San Antonio, TX (MSA) 1,733 +242%

18 Little Rock-North Little Rock, AR (MSA) 1,715 +38%

19 Oakland-Fremont-Hayward, CA (Div.) 1,634 +137%

20 El Paso, TX (MSA) 1,588 +188%

.....




http://www.builderonline.com/Images/Smart-Corner_tcm10-724383.jpg http://www.builderonline.com/Images/Bayside_tcm10-724343.jpg

[mhays]

Are they referring to land use permits or building permits? How odd that they don't clarify this. No wonder I don't get Builder anymore.

Either way, a 2010 review is ancient history from an industry point of view. Anything that got either type of permit in 2010 was ramped up well before that. When I think of what's "hot," the question is what's developers have in the pipeline or are breaking ground on today, not last year.

[pesto]

What's going on in San Jose? Did they change the law? I understand the economy is getting stronger but the percentage gain is ridiculous.

[mhays]

Not rediculous at all. All it means it that in 2009 virtually nothing was permitted, and in 2010 the market starting breathing again.

[pesto]

But I would think that that was true for the country generally, except some parts of the the south. I don't question the numbers but am surprised that the recession hit that hard in SJ and is now recovering that strongly.

btw, SJ, Sunnyvale and Santa Clara strike me as prime candidates for denser housing; the businesses are there in spades and hiring again, and the traffic getting there is bad. The area from downtown SJ to the Airport and along 101 should be getting lots of in-fill apartments if the cities are reasonable.

[djlx2]

Are they referring to land use permits or building permits? How odd that they don't clarify this. No wonder I don't get Builder anymore.

Either way, a 2010 review is ancient history from an industry point of view. Anything that got either type of permit in 2010 was ramped up well before that. When I think of what's "hot," the question is what's developers have in the pipeline or are breaking ground on today, not last year.

agreed. though, reasonably speaking, what developers have in the pipeline is the most obscure part, since you can't even take a look at it the way you can photograph projects breaking ground. Plus info on it is harder to find in the denser urban areas, obviously. Been spending some time digging around on the internet today about california, for example...always have a hard time with international buildings, too...

[babybackribs2314]

But I would think that that was true for the country generally, except some parts of the the south. I don't question the numbers but am surprised that the recession hit that hard in SJ and is now recovering that strongly.

btw, SJ, Sunnyvale and Santa Clara strike me as prime candidates for denser housing; the businesses are there in spades and hiring again, and the traffic getting there is bad. The area from downtown SJ to the Airport and along 101 should be getting lots of in-fill apartments if the cities are reasonable.

Agreed. Usually I only focus on the Megalopolis, but California strikes me as an area (as well as Texas, potentially in the more distant future) where real megaregions are now arriving. I don't think San Francisco and Los Angeles will ever be part of something like the Megalopolis between each other, but in their own rights they are/will be massive. San Francisco basically stretches from Napa to Sacramento to San Jose, and Los Angeles is from Bakersfield down to San Diego practically.

I feel like Los Angeles is going to become simply visually more massive in the coming decade, with continued densification becoming more visible as pressure keeps increasing. Speculation, but perhaps a Vancouver type of skyline could arise? I think that would look gorgeous. The corridor between San Francisco and San Jose is also definitely ripe for growth, and those areas will continue to grow into each other.

The trends in Texas really highlight the beginnings of maturation in both Dallas and Houston, I think. The coming decade's growth is going to be huge in their inner cities and suburbs, with large areas of dense infill.

[JDRCRASH]

I wonder if this includes the trend of building 2, or even 3 or more houses on big lots. I've been seeing A LOT of that lately, especially in lower-income places like Baldwin Park and Azusa.
From what I understand, it's often a case of an entire family moving into a backhouse, and is a cheaper alternative than finding a single house lot.

Maybe this sort of trend will continue into South LA? If so, this will greatly help increase density in sprawling Los Angeles.

[babybackribs2314]

But I would think that that was true for the country generally, except some parts of the the south. I don't question the numbers but am surprised that the recession hit that hard in SJ and is now recovering that strongly.

btw, SJ, Sunnyvale and Santa Clara strike me as prime candidates for denser housing; the businesses are there in spades and hiring again, and the traffic getting there is bad. The area from downtown SJ to the Airport and along 101 should be getting lots of in-fill apartments if the cities are reasonable.

Agreed. Usually I only focus on the Megalopolis, but California strikes me as an area (as well as Texas, potentially in the more distant future) where real megaregions are now arriving. I don't think San Francisco and Los Angeles will ever be part of something like the Megalopolis between each other, but in their own rights they are/will be massive. San Francisco basically stretches from Napa to Sacramento to San Jose, and Los Angeles is from Bakersfield down to San Diego practically.

I feel like Los Angeles is going to become simply visually more massive in the coming decade, with continued densification becoming more visible as pressure keeps increasing. Speculation, but perhaps a Vancouver type of skyline could arise? I think that would look gorgeous. The corridor between San Francisco and San Jose is also definitely ripe for growth, and those areas will continue to grow into each other.

The trends in Texas really highlight the beginnings of maturation in both Dallas and Houston, I think. The coming decade's growth is going to be huge in their inner cities and suburbs, with large areas of dense infill.

[Gordo]

What's going on in San Jose? Did they change the law? I understand the economy is getting stronger but the percentage gain is ridiculous.

I think it's impossible to know because the article doesn't explain what they mean by "permitted in 2010." The SJ area has a ton of stuff that's been on the books for a long time (and working its way from permit to construction or in a holding pattern), but as far as I know there hasn't been anything to change that number significantly this year over last.

[dave8721]

Not rediculous at all. All it means it that in 2009 virtually nothing was permitted, and in 2010 the market starting breathing again.

Same thing with Miami with its 331% increase. Pretty much nothing got proposed after the crash. Now things are picking up again.

[dimondpark]

The corridor between San Francisco and San Jose is also definitely ripe for growth, and those areas will continue to grow into each other.
That entire corridor has been built out and overlapping for decades.
http://i107.photobucket.com/albums/m293/luiinsac/sanjosemsa.jpg?t=1302016196

As you eluded to, what's emerging in Northern California is indeed a kind of 'megalopolis' comprised of the San Francisco Bay Area and basically everything within 100-150 mile radius of the City of San Francisco.

One of the benefits SF has(along with most large Western cities) of being so remote with relation to the rest of the country is that is the defacto hub for a very large area.

This is a post of mine from the NorCal census thread:

The megalopolis around San Francisco records its 7th straight decade of adding 1 Million+ residents

San Francisco CSA /Sacramento CSA/Stockton MSA/Modesto MSA/Salinas MSA
Population
1940 2,526,054
1950 3,647,000
1960 5,066,320
1970 6,455,400
1980 7,530,800
1990 9,114,800
2000 10,435,800
2010 11,544,986

Net Population Change
1940-1950 +1,120,946(+44.3%)
1950-1960 +1,419,320(+38.9%)
1960-1970 +1,389,080(+27.4%)
1970-1980 +1,075,400(+16.6%)
1980-1990 +1,584,000(+21.0%)
1990-2000 +1,384,000(+15.1%)
2000-2010 +1,108,800(+10.1%)

Total Numerical Growth 1940-2010 +9,018,932

Total Percentage Growth 1940-2010 +457%[/QUOTE]


Another interesting aspect of the region in 2011 is the incredible racial and ethnic diaspora that has spreads all over the Bay Area and deep into outlying metro areas as well.
1 dot=1,000 people
Green=White, Blue=Black, Yellow=Hispanic, Red=Asian

http://i107.photobucket.com/albums/m293/luiinsac/greaternorcal2010.png?t=1301586063

[pesto]

dimondpark: agree with everything, but I think that babyback and I were talking more about the arrival of urban density in SJ, Santa Clara and Sunnyvale. This area used to be 2-story R&D and now is becoming multi-story commercial with many large housing developments, especially along 101. But the most interesting to me is around HP Pavilion, along North First and the airport where apartments and condos are being built on the former lawns or parking lots of office buildings, creating a kind of jumble of non-linear commercial and residential spaces. I had long ago written off this area as having "suburban" genes, but it appears that with some flexibility cities can turn suburban areas into at least partly urban density.