Rental Housing Journal Colorado March 2016

Rental Housing Journal Colorado

March 2016 - Vol. 8 Issue 3

2. Rents to Flatten in 2016 3.

4. Ask the Secret Shopper – Ready Vacants

Fair Housing Facts & Tips

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Monthly Circulation To More Than 7,000 Apartment Owners, Property Managers, On-Site & Maintenance Personnel

4Q15 Market Overview Multifamily Housing Update

Denver, CO Payroll Job Summary Total Payrolls Annual Change RCR 2016 Forecast RCR 2017 Forecast RCR 2018 Forecast RCR 2019 Forecast RCR 2020 Forecast Unemployment (NSA)

1,396.7m 28.2m (2.9%) 32.0m (2.3%) 40.0m (2.8%) 35.9m (2.5%) 29.3m (2.0%) 27.2m (1.8%) 3.1% (Dec.)

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4Q15 Payroll Trends And Forecast Denver payroll employment growth decelerated for the third consecutive quarter, slowing to a 28,200-job, 2.1% year-on-year pace, down from 1Q15’s 50,900-job, 3.9% cycle peak and the 3Q15’s 34,500-job, 2.5% performance.

Weakness in the oil and gas sector is largely responsible, giving rise to softer conditions in the manufacturing and non-high tech related components of the business services sector. In addition, data indicate that conditions in industries driven by population and disposable income growth — retail trade, health care, government and leisure services — also weakened, suggesting that spot labor, housing and commercial real estate shortages and other resource constraints are developing, fettering Denver’s unusually rapid economic expansion.

Indeed, home price inflation accelerated in the second half of the year, continued on page 5

Commercial Real Estate Experts

D

Moderate Expansion, Easing Prices Expected in 2016

espite various global and domestic hurdles hindering economic growth, steady job gains and stable leasing demand should help keep commercial real estate activity expanding in 2016, according to the authors of an annual report published jointly by Situs Real Estate Research Corporation (RERC), Deloitte and the National Association of Realtors®.

According to the report, Expectations & Market Realities in Real Estate 2016—Navigating through the Crosscurrents, commercial real estate activity is forecast to gradually grow this year with demand for space holding steady across all commercial sectors. While commercial property values and price gains are expected to flatten after surpassing 2007 peaks in some major markets, investors will still benefit from the strong income flows generated from new and existing leases.

The fift h annual release of the joint report draws on the three organizations’ respective research and expert

analysis and offers an objective outlook on commercial real estate through forecasts and commentary on the current economy, capital markets and commercial real estate property markets. A research-based assessment of the office, industrial, apartment, retail and hotel property sectors is also provided.

“Historically low interest rates, especially in treasuries, combined with commercial real estate’s stable prices

and value make this asset an attractive investment,” says Ken Riggs, president of Situs RERC. “Looking into 2016, the commercial real estate market should moderate, which could stabilize prices.”

Vacancies are expected to continue to decline slightly in 2016 for all property types, except in the apartment sector, where they are forecast continued on page 7

EPA Cracks Down On Lead Violations

By Jo Becker Education/Outreach Specialist, Fair Housing Council of Oregon

L

ate last year the Environmental Protection Agency (EPA) announced it took action against 75 renovation contractors and others to protect people from harmful lead dust and debris exposure, as required by federal Lead-based Paint Renovation, Repair, and Painting (RRP) regulations.

These cases show EPA is cracking down on businesses and renovators who ignore federal requirements that have been in effect for several years now. These requirements apply to many repairs and renovations done to painted surfaces in homes and daycare facilities built prior to 1978. Pre-78 properties are of concern, as they are a major source of lead exposure that can

cause lead poisoning, especially in our nation’s young children.

The RRP Rule, which is part of the federal Toxic Substances Control Act, is intended to ensure that owners and occupants of pre-1978 “target housing” and “child-occupied facilities” receive information on lead-based paint hazards before renovations begin, that individuals performing such renovations

Advertise in Rental Housing Journal Colorado Circulated to over 7,000 apartment owners, on-site and maintenance personnel monthly.

Call 503-221-1260 for more information

are properly trained and certified, and that renovators follow specifically prescribed lead-safe work practices to reduce the potential for exposure to lead for all, including workers.

Renovators are required to give the pamphlet to property owners and occupants within 60 days before starting a renovation. Housing providers, continued on page 7

Rental Housing Journal Colorado

Rents to Flatten in 2016

A

fter years of record rent appreciation, Zillow’s rental forecast shows relief in sight for cashstrapped renters.

• National median rent at the end of 2015 was $1,381, and is expected to increase slightly to $1,396 over the next 12 months.

• The slowdown in rents means that, by the end of the year, they will be rising at a slower pace than incomes in many markets.

• In December, home values rose 4 percent to a Zillow Home Value Index of $183,500.

Rent appreciation will level off over the next 12 months, slowing to an an-

nual rate of 1.1 percent by December 2016, according to the new Zillow® Rent Forecasti. The national Zillow Rent Indexii at the end of 2016 is projected to be $1,396 -- compared to $1,381 in December 2015.

Zillow is forecasting a decrease in the rate of rental appreciation amid a rental affordability crisis that has renters in some markets spending almost half of their income on rent. Some of the fastest growing metros had double-digit annual rental appreciation at the end of 2015.

Zillow expects rental appreciation to slow down most significantly in Nashville, Tenn., San Francisco, Portland, Ore. and Denver. Rents in San Francisco saw 12.5 percent appreciation in

2015. Zillow forecasts rent in San Francisco will grow half as fast in 2016 -5.9 percent.

Even with the slowdown, rents will remain unaffordable in many of the major markets across the U.S., especially on the West Coast. Renters in San Francisco and Los Angeles can expect to spend 40 percent of their income on a rental paymentiii.

“Hot markets are still going to be hot in 2016, but rents won’t rise as quickly as they have been,” said Zillow Chief Economist Dr. Svenja Gudell. “The slowdown in rental appreciation will provide some relief for renters who’ve been seeing their rents rise dramatically every single year for the past few years.

However, the situation remains tough

on the ground: rents are still rising and renters are struggling to keep up.”

The slowdown in rental appreciation indicates that supply of new multi-family homes is catching up to demand.

Substantial new housing supply is becoming available in Atlanta, Denver, Portland, Seattle, and other markets.

The Zillow Home Value Index rose 4 percent year-over-year in December 2015, to $183,500, according to the Zillow® December Real Estate Market Reportsiv.

Metropolitan Area

Dec. 2015 ZHVI

Dec. 2015 ZRI

ZRI Forecast for Dec. 2016

Forecasted Difference Between Dec. 2015 ZRI and Dec. 2016 ZRI

United States

$183,500

$1,381

$1,396

1.1%

New York/Northern New Jersey

$381,200

$2,384

$2,400

0.7%

Los Angeles, CA

$554,700

$2,491

$2,561

2.8%

Chicago, IL

$193,000

$1,633

$1,611

-1.4%

Dallas-Fort Worth, TX

$177,200

$1,500

$1,532

2.1%

Philadelphia, PA

$203,100

$1,558

$1,550

-0.5%

Houston, TX

$170,100

$1,579

$1,619

2.5%

Washington, DC

$357,800

$2,107

$2,118

0.5%

Miami-Fort Lauderdale, FL

$225,700

$1,822

$1,886

3.5%

Atlanta, GA

$160,000

$1,274

$1,280

0.5%

Boston, MA

$382,900

$2,247

$2,309

2.7%

San Francisco, CA

$785,800

$3,338

$3,536

5.9%

Detroit, MI

$121,800

$1,132

$1,128

-0.4%

Riverside, CA

$298,200

$1,691

$1,723

1.9%

Phoenix, AZ

$216,000

$1,249

$1,266

1.4%

Seattle, WA

$368,700

$1,931

$2,018

4.5%

Minneapolis-St. Paul, MN

$214,300

$1,500

$1,511

0.8%

San Diego, CA

$499,900

$2,316

$2,348

1.4%

St. Louis, MO

$141,000

$1,123

$1,115

-0.7%

Tampa, FL

$160,100

$1,296

$1,302

0.5%

Baltimore, MD

$242,300

$1,714

$1,702

-0.7%

Denver, CO

$320,800

$1,952

$2,031

4.0%

Pittsburgh, PA

$126,700

$1,090

$1,079

-1.0%

Portland, OR

$310,200

$1,689

$1,753

3.8%

Charlotte, NC

$157,800

$1,221

$1,250

2.4%

Sacramento, CA

$331,500

$1,599

$1,654

3.4%

San Antonio, TX

$148,000

$1,301

$1,306

0.4%

Orlando, FL

$180,600

$1,343

$1,373

2.2%

Cincinnati, OH

$141,800

$1,225

$1,243

1.5%

Cleveland, OH

$124,300

$1,124

$1,117

-0.6%

Kansas City, MO

$146,600

$1,199

$1,228

2.4%

Las Vegas, NV

$199,800

$1,212

$1,191

-1.8%

Columbus, OH

$150,900

$1,271

$1,289

1.4%

Indianapolis, IN

$130,100

$1,181

$1,138

-3.6%

San Jose, CA

$933,000

$3,431

$3,699

7.8%

Austin, TX

$242,900

$1,683

$1,741

3.4% Source Zillow

Advertise in Rental Housing Journal Colorado Circulated to over 7,000 apartment owners, on-site and maintenance personnel monthly.

Call 503-221-1260 for more information w w w. r e n t a l h o u s i n g j o u r n a l . c o m 2

Rental Housing Journal Colorado · March 2016

Rental Housing Journal Colorado

T

Fair Housing Facts & Tips

he Fair Housing Act protects people from discrimination when they are renting, buying, or securing financing for any housing transaction. The Fair Housing Act specifically cover’s discrimination because of race, color, national origin, religion, sex, disability and the presence of children. (Provided by HUD)

Fair housing laws prohibit illegal housing discrimination.

Discrimination is illegal in any housing situation if it is based on, or adversely affects, a “protected class.” That is, if someone is denied a home, is treated differently, or is harassed because of one of the reasons listed below, it is illegal.

Consistency is Key! 1. Remember to be consistent within your daily job performance & Interactions when dealing with residents, prospective residents and their guests 2. Never make assumptions regarding a. Disabilities b. If an animal is a companion or pet c. Treat everyone the same!

The information and purpose of leasing and Fair Housing is not to scare you out of the industry. It is an extremely important part of the job performance and expectation. Fair Housing classes will give you the understanding of pitfalls of falling into possible discrimination in Fair Housing. It also prepares and gives the tools necessary to help avoid complaints.

Ignorance Of The Law Is No Excuse!

• Real Estate Lenders

• Individuals, Corporate & Business Owners

My best advice is Document, Document, and Document!

Discrimination is sometimes deliberate or unintentional due to lack of Fair Housing knowledge toward residents, prospective residents & their guests that fall into any protected class category Unfortunately, even the best of inMore often than not Apr, discrimination Feb, Jun, Aug, Oct, Dec tentions of the leasing consultant can occurs during the leasing process while put them, the owner and Management dealing with prospective residents. Company at risk. Make no mistake, BE CAREFUL! Fair Housing and discrimination is real and happens.

• Maintenance, Leasing & Administrative staff • Outside Vendors such as Landscapers, Painters,

Brokers,

• Homeowners & Condo Associations

Learn about the Federal, State and Local protected class on The Fair Housing website http://fhco.org

Documentation How does documentation have the Here are a few examples that oc- potential for a complaint?

Example: You may have a star on cur during leasing: Example: Oh my, your children are one guest card and not another or you beautiful! I have the perfect home for may have written she is so sweet make a you on the ground floor by the play- great resident! ground! I am so excited to show you Intention: You really liked that prosthis apartment pect and really thought they would Intention: More than likely the leas- make a great resident and noted as ing associate has the best intentions for much on their guest card the prospective residents, it is still DISPerception: This could be construed CRIMATION. as discrimination base on the fact that Perception: This is discrimination in these types of doodles and or comthe form of Steering, and could prompt ments were not present on all guest cards. These guest cards would be a complaint.

Correct Action: Anyone applying for brought into question should a coman apartment can live in any available plaint be filed Remember not to doodle or make unit and must be show the same apartmarks on applications, guest cards ments as anyone applying ON-SITE-NW SEATTLE Prevention: EDUCATE, EDUCATE, or any paperwork related to prospect VALLEY, METRO, ARIZONA APT. NEWS EDUCATE! It is necessary to make cer- or resident tain that the associates working for youIndustries Salsbury are knowledgeable and trained to mini- Fair Housing Laws apply to: mize the risk to you and your company • Owner / Agents Discrimination is Discrimination!

• Property Management Companies

Agents,

• Architects, Builders, Developers, Engineers • Responsibility is non-delegable • Ignorance of the law is no excuse A couple of thoughts, ask your associates and how they would address these scenarios in the leasing process?

(In red are common answers and or thoughts your will receive from the well intentioned leasing associates and are discriminatory, in my experience during training) • Women with 2 young children? Do not make assumptions! . This women and children will be quite, I can put them upstairs • Married couple with 2 teen aged boys? . Those boy are going to be trouble • Married couple with 1 teen aged girl? . Quite residents

Discrimination is real and can be prevented!

by Dana Brown – EDGE Training – Full Spectrum Residential Services, LLC danabrown3321@gmail.com or 503-740-8432

• Exterminators, Insurers, etc.

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VALLEY, METRO, ARIZONA APT. NEWS

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Rental Housing Journal Colorado · March 2016

OR-RTG-20 Oregon

CHECK-IN/CHECK-OUT CONDITION

ION REPORT

TENANT(S): ___________ ADDRESS: ___________ _________________________________ ______________________ ______________________ CITY: ___________ _______________UNIT: ______________________ ______________ __ STATE: ________ Rating Scale = (E)Excellent ZIP: ___________ (E)Excellent (VG) ______ Very Good (G)Good

REPORT

WA-RTG-40 Washington

In

(F)Fair

Rating Scale = (E)Excellent

TENANT(S): ____________________________________________________ DATE:________ IN ADDRESS: ____________________________________________________ UNIT: _________ LIVING AREAS CITY: _________________________________________ STATE: __________ ZIP: _________

(VG) (V G) Very Good

Out

(G)Good

In

In BEDROOM 3 Walls

(P)Poor

BEDROOM 3

In

__ ______________________ ___________________ UNIT: U ___________________ _________ STATE: __________ ZIP: _________

Out

48-HOUR NOTICE OF ENTRY

Windows

Pursuant to RCW 59.18.150, this is your 48 hour notice that entering the dwelling your la landlord or their agents unit and ______________________ premises located at (Address) will be ______________________ ______________________ ____________ on between the hours of (Date) and .

(Time) (Time) The entry will occur for the Fireplace ______________________ following purpose: ___________ Cleanliness Doors/Woodwork___________ ______________________ _________________________________ ___________ ______________________ Locks ______________________ _ _ Windows

Blinds/Drapes

2) Type _______________ Breed _______________ Size ______ Age __ Weight ___ Color ____ Name ________ Vaccinations: Yes____ No____ License Number: ______________

Blinds/Drapes Rods Floor Light Fixtures

Walls

DESCRIPTION OF PET(S) 1) Type _______________ Breed _______________ Size ______ Age __ Weight ___ Color ____ Name ________ Vaccinations: Yes____ No____ License Number: ______________

Rods

Floor

Out

Light Fixtures

Additional Security Deposit Required:$

Tenant(s) certify that the above pet(s) are the only pet(s) on the premises. Tenant(s) understands that the additional pet(s) are not permitted unless the landlord gives ten ant(s) written permission. Tenant(s) agree to keep the above-listed pets in the premises subject to the following terms and conditions:

1) The pet(s) shall be on a leash or otherwise under tenant’s control when it is outside the tenant’s dwelling unit.

2) Tenant(s) shall promptly pick up all pet waste from the premises promptly.

3) Tenant(s) are responsible for the conduct of their pet(s) at all times.

4) Tenant(s) are liable for all damages caused by their pet(s).

5) Tenant(s) shall pay the additional security deposit listed above and/or their rental agreement as a condition to keeping the pet(s) listed above.

6) Tenant(s) shall not allow their pets to cause any sort of disturbance or injury to the BEDROOM other tenants, guests, landlord or any other persons lawfully on the premises.

1 7) Tenant(s) shall immediately report to landlord any typeWalls of damage or injury caused by their pet.

Windows 8) This agreement is incorporated into and shall become part of the rental agreement exe -cuted between the parties. Failure by tenant to comply with any part of this agreement Blinds/Drapes shall constitute a material breach of the rental agreement. _____________________________ Landlord

Rods

______________________________ Floor Tenant ______________________________ Light Fixtures Tenant Doors/Woodwork

Locks ©2011 NO PORTION of this form may be reproduced without written permission.

Ceilings Electrical Outlets

Ceilings

BEDROOM 1

Electric Outlets

Walls

Windows

Phone

Method of Service:

Personal Service:

* Add one additional

Windows

Sink & Vanity

BEDROOM 2 Walls Windows Blinds/Drapes Rods Floor Light Fixtures Doors/Woodwork Locks Ceilings Electric Outlets

may be reproduced without written

Blinds/Drapes

Rods

Light Fixtures if served by post

Floor

and mail. m

Doors/Woodwork Locks Ceilings Electric Outlets

Doors/Woodwork

Locks

Tub/Shower

Locks

Ceilings

Fan (Exhaust)

Ceilings

Electrical Outlets

Floor

Electric Outlets

Smoke Detectors

Smoke Detectors

Electric Outlets

©2009 NO PORTION

of this form may

Plumbing Heating Electricity Hot Water

Towel Bars

Sink & Vanity

Toilet

Tub/Shower

Fan (Exhaust)

Floor

of this form may

be reproduced without

written permission.

sales@rentegration.com 02

Electric Outlets Light Fixtures

Essential Services Plumbing Heating Electricity Hot Water Smoke Detectors

Light Fixtures

©2009 NO PORTION

BATH ROOM

Light Fixtures

Doors/Woodwork

Essential Services

permission.

Rods

*

Floor

day for compliance

Toilet

Smoke Detectors

©2011 NO PORTION of this form

BEDROOM 2

Walls

Landlord

Blinds/Drapes

BATH ROOM Towel Bars

do NoT put over a busy background

Smoke Detectors

www.rentegration.com 503-933-6437

3) Type _______________ Breed _______________ Size ______ Age __ Weight ___ Color ____ Name ________ Vaccinations: Yes____ No____ License Number: ______________

AGREEMENT

(F)Fair (F)F

Out

(P)Poor (

Out

48-HOUR

NOTICE OF ENTRY TENANT(S): OR-RTG-24 Oregon ____________________ ________________________________________ ______ ADDRESS: ____________________ ____________________________UNIT: TENANT(S): ______________________ ______________

___________ ADDRESS: ___________ PET AGREEMENTCITY: ___________________________________ STATE: ________ ZIP: _________________ ______________________ ___________________ D DATE:______ _____________ CITY:

TENANT INFORMATION

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be reproduced without

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3

Rental Housing Journal Colorado

SK THE SECRET SHOPPER Ready Vacants

W

hile market conditions remain strong, there may be times when you find yourself in a situation where you have no apartments to show. Maybe you don’t have a model or you’re in a make ready process with the vacant apartments that are available. Here is the question:

Q

I know I shouldn’t show an apartment that isn’t ready, but I hate to ask someone to come back. Everyone is so busy I just don’t think they’ll make the time to come back for another visit.

What can I do?

A

First of all, you do not have to show an apartment in order to rent one.

While many people are “visual” and having a model or vacant apartment to show may seem like an advantage, it is not the only sales tool you have at your

Publisher Will Johnson – will@propubinc.com Designer/Editor Kristin Flores – kristin@propubinc.com

disposal. Here is what can happen when there is no apartment available to show: With a diagram of a 2 bedroom, the consultant “walked me through” the apartment as though we were inside.

She used the terms “you” and “yours” during the entire “visual” tour. She pointed out the various storage areas, and also showed me the shelf and cabinet over the washer and dryer. The consultant used descriptive words like “oak cabinetry” and “spacious breakfast bar.” She mentioned the wood-burning fireplace and vaulted ceilings, and pointed out the fireplace and indicated where the ceiling begins to get higher.

The consultant also helped me visualize what type of furniture would fit in each room.

When the apartment “presentation” was completed, the consultant walked me over to the location of the upcoming apartment. She pointed out and described the amenities we saw along

the way and discussed the proximity of each one to the apartment. She indicated where I and my guests could park. Standing outside the apartment, the consultant pointed out other advantages to this location. She drew my attention to the private patio, nearby fountain and lush landscaping. She also mentioned the friendly neighbors upstairs and next door.

Once the leasing consultant confirmed I was pleased with what I had learned about the apartment and community, she asked if I would like to put a hold on the apartment until it was ready to view. When I declined, she told me she understood my hesitation since I had not actually seen the apartment. However, she reminded me it was the only one she had coming available; without a deposit she couldn’t hold it for me. As I continued to hesitate, she told me my deposit would be fully refundable if I did not like the apartment once I saw it.

As you can see, having no apartment to show did not hamper the leasing consultant’s ability to sell AND close the sale! In fact, it was quite the opposite: She became even more creative in selling her product! She had the opportunity to go the extra mile and “create a visual,” and she took advantage of

it. The prospective renter in this situation got a more comprehensive tour when there was no apartment available to show!

Remember: You only get one chance to make a good first impression. Selling what you have to offer will increase your leasing ratio. Rather than demonstrating a dirty apartment or asking the client to come back, put your product knowledge to the test: Give a thorough presentation with whatever sales tools you have at your disposal, and then close the sale. Once you rent that last vacant apartment sight unseen, you will have the confidence to prelease all those upcoming notices . . .

If you are interested in leasing training or have a question or concern you would like to see addressed, please reach out to me via e-mail. Otherwise, please contact Jancyn for your employee evaluation needs: www.jancyn.com ASK THE SECRET SHOPPER Provided by: Joyce (Kirby) Bica Former owner of Shoptalk Service Evaluations Consultant to Jancyn Evaluation Shops E-mail: shptalk2@gmail.com Copyright © Joyce (Kirby) Bica

Advertising Sales Will Johnson – will@propubinc.com Terry Hokenson – terry@propubinc.com Larry Surratt – larry@propubinc.com

Rental Housing Journal Colorado is a monthly publication published by Professional Publishing Inc., publishers of Real Estate Opportunities in Investing & Real Estate Investor Quarterly

www.rentalhousingjournal.com The statements and representations made in advertising and news articles contained in this publication are those of the advertiser and authors and as such do not necessarily reflect the views or opinions of Professional Publishing, Inc. The inclusion of advertising in this publications does not, in any way, comport an endorsement of or support for the products or services offered. To request a reprint or reprint rights contact Professional Publishing Inc. PO Box 6244 Beaverton, OR 97007. (503) 221-1260 - (800) 398-6751 © 2015 All rights reserved.

4

Rental Housing Journal Colorado · March 2016

Rental Housing Journal Colorado

4Q15 Market Overview

...continued from page 1

and RED Research models project that this growth constraint will continue for a year or more. We expect the Denver FHLA and Case-Shiller home price indices to advance at double-digit rates through mid- 2017, with negative implications for MFH rent growth..

As for job creation, our econometric model indicates that DEN is near the end of the slowing cycle. The 98.5% adjR2 (SE=0.3%) model employs two lags of the dependent variable, the rate of change of US job growth, metro personal income, GDP and oil price growth as variables. The model expects DEN to stabilize in 1H16; return to high -2% annual growth through 2017; slowing afterward.

Occupancy Rate Summary Occupancy Rate (Reis) 94.9% RED 50 Rank 35th Annual Chg. (Reis) -0.8% RCR YE16 Forecast 94.5% RCR YE17 Forecast 94.4% RCR YE18 Forecast 93.8% RCR YE19 Forecast 93.5% RCR YE20 Forecast 93.0%

4Q15 Absorption And Occupancy Rate Trends Rental demand was seasonally strong as tenants net leased 1,308 units during 4Q15, according to Reis, about 100 fewer than expected (by the RCR demand model) under the circumstances. But supply was overwhelming (2,671 units) —more than 1,000 units greater than our supply model in-sample forecast — causing metro occupancy to plunge -60 basis points to 94.9%, the largest sequential decline posted since 1Q09.

Declines were concentrated in submarkets experiencing heavy supply deliveries, most notably North (-450 bps) and South (-420 bps) Denver.

Axiometrics surveys of larger, stabilized assets recorded somewhat weaker results, suggesting that supply pressures are greater among large assets. Metro occupancy averaged 94.5% during 4Q15, down -120 bps y-o-y. Class-C units suffered a rare decline (-130 bps to 95.1%), but maintained higher levels than classes-A (94.2%) and –B (94.4%).

RCR’s demand model uses the rate of change of inventory and job growth (+) and home prices (-) to achieve a 91.8% ARS (SE=0.4%). The result is optimistic, projecting annual absorption between 4,500 and 5,400 units through 2020.

But inventory is expected to grow about 25% faster than demand, resulting in further occupancy attrition.

Effective Rent Summary Mean Rent (Reis) Annual Change RED 50 Rent Change Rank RCR YE16 Forecast RCR YE17 Forecast RCR YE18 Forecast RCR YE19 Forecast RCR YE20 Forecast

$1,054 6.8% 5th 5.0% 4.5% 3.8% 3.2% 2.7%

have given rise to a much smaller advance. Percent gains were evenly distributed between the class-A and classB&C segments, suggesting that heavy class-A supply has not yet placed significant downward pressure on luxury product revenues.

Axiometrics surveys of large, stabilized same-store properties told a somewhat different story. In this case, rent trends decelerated materially as 4Q sequential trends fell -$30 in 2015 from +$11 in 2014; and year-on-year comparisons slowed from 10.9% in 3Q15 to 7.5%. In this sample, the class -A segment was weakest, rising only 4.4% y-o-y, while classes-B (7.1%) and –C (10.5%) outperformed. The rate of growth in each class, however, fell onethird sequentially.

The RCR rent model suggests that growth is likely to decelerate further, but will continue at a faster pace than a majority of primary and secondary markets. Robust job growth and slower occupancy attrition should keep rent trends at or above 4% through mid-2018. Five-year annual compound growth of 3.9% is expected, third fastest among the RED 46 markets after New York (4.6%) and Portland (4.3%).

Trade & Return Summary $5mm+ / 80-unit+ Sales Approximate Proceeds Average Cap Rate (FNM) Average Price / Unit Expected Total Return RED 46 ETR Rank Risk-adjusted Index RED 46 RAI Rank

33 $1.5bn 5.2% $176,607 7.5% 11th 3.24 34th

4Q15 Property Markets and Total Returns A flurry of year-end closings pushed Denver transaction velocity and sales proceeds to record levels during 4Q15 as managed funds, private equity investors and private owner/managers went to great lengths to add Denver exposure, while a similarly distributed group of early entrants sought to take advantage of a “seller’s market” to secure attractive investment returns. A total of 33 sales were consummated during the period, equaling the previous record set in 4Q14. Proceeds totaled over $1.53 billion, establishing a new quarterly high, topping the year earlier period’s $1.35 billion record.

Cap rates continued to drill lower.

The CoStar average declined to a 10year low 5.26%, down about -40 bps year -on-year. Recent construction class-A properties traded in the low– to mid-4% range. Nineties vintage assets commanded prices equating to mid4% to mid-5% yields. Value-add plays found buyers in the low– to high-5 area.

RCR trimmed -30 bps from the cap rate proxy to 5% to reflect current conditions. At this level and model derived rent and occupancy point estimates, we calculate that a DEN investor would expect to earn a 7.5% annual IRR over 5-years, ranked #11 among the RED 46.

Cap rate compression cut returns by-40 bps. High rent model standard error hindered risk-adjusted returns to peer group 34th rank.

4Q15 Effective Rent Trends Denver rent trends maintained an above historical average trajectory during 4Q15, rising $13 (1.2%) sequenDaniel J Hogan tially to $1,054, according to Reis. The By Director of Research strong performance was recorded de- djhogan@redcapitalgroup.com Office spite a 60 basis point increase in va- 614-857-1416 1-800-837-5100 Toll Free continued on page 6 cancy, an outcome that typically would Rental Housing Journal Colorado · March 2016

5

Rental Housing Journal Colorado

4Q15 Market Overview

...continued from page 5

The information contained in this report was prepared for general information purposes only and is not intended as legal, tax, accounting or financial advice, or recommendations to buy or sell currencies or securities or to engage in any specific transactions. Information has been gathered from third party sources and has not been independently verified or accepted by RED Capital Group.

RED makes no representations or warranties as to the accuracy or completeness of the information, assumptions, analyses or conclusions presented in the report. RED cannot be held responsible for any errors or misrepresentations contained in the report or in the information gathered from third party sources. Under no circumstances should any information contained herein be used or considered as an offer or a solicitation of an offer to participate in any particular transaction or strategy. Any reliance upon this information is solely and exclusively at your own risk. Please consult your own counsel, accountant or other advisor regarding your specific situation. Any views expressed herein are subject to change without notice due to market conditions and other factors.

continued on page 8

Advertise in

Rental Housing Journal Colorado Circulated to over 7,000 apartment owners, on-site and maintenance personnel monthly.

Call 503-221-1260 for more information 6

Rental Housing Journal Colorado 路 March 2016

Rental Housing Journal Colorado

Commercial Real Estate

...continued from page 1

to increase modestly by the end of the year as more new project completions come onto the market. Continued job growth, demand exceeding supply and limited new construction (outside of multifamily) should lead to rising rents and steady investor returns, which overall will shift away from capital appreciation as price growth levels off in many markets.

Continuing on the same slow trajectory seen for many years, the U.S. economy – facing headwinds from a rising dollar, financial market volatility and geopolitical concerns – is forecast to grow at a rate of 2 percent to 3 percent in 2016, which is stronger than most global economies and enough to generate around two million net new jobs over the next year. Deflationary pressures related to low gasoline and energy prices are expected to diminish by mid2016, in part because of robust growth in apartment rents.

“Supported by solid hiring in most parts of the country, the demand for ownership and rental housing will continue to increase in 2016 despite another year of meager economic expansion,” says Lawrence Yun, NAR chief economist. “While supply shortages will weigh on housing affordability and push home prices and rents higher, the housing sector will keep the U.S. economy afloat and lead the residential investment component of GDP growth by up to 10 percent this year.”

SOURCE National Association of Realtors

EPA Cracks Down On

...continued from page 1

similarly, have obligations to notify residents prior to covered repairs and renovations, to share informational literature with them, including a disclosure form, and to be lead-safe certified or hire a contractor who is.

To protect yourself and your investment, it’s important, that you assure the contractors you hire are in fact lead-safe certified and complying with the EPA’s safe work practice requirements. To learn more about what repairs are covered and what these worksafe practices are, visit http://www.epa. gov/sites/production/fi les/documents/ renovaterightbrochure.pdf.

The EPA reported that rough twothirds of the cases they recently settled involved failure to obtain EPA certification prior to conducting renovations. Over half the cases were related to violations of required safe work practice standards.

The EPA states its aim in seeking penalties against RRP violators is to help deter other violations and to level the playing field for companies that do follow the law. Such fines and settlements help eliminate the financial advantage a violator may get by underbidding competitors that are compliant.

You can read the full EPA media release here: http://yosemite.epa.gov/ opa /ad mpre s s .nsf /0/0D3D2DBE 30561BAD85257EEB00698FC7 ‘Looking for a lead-safe contractor or want to become certified yourself in order to do work on your own properties?

Call the Leadline for free information at 503/988-4000.

A reminder that although lead poisoning is especially dangerous for kids, the fear of lead poisoning or liability does not give housing providers the right to deny or discourage families with children away from pre-1978

housing. Familial status is a protected class under federal fair housing law1 and doing anything to deny or discourage otherwise qualified families is illegal. Visit www.FHCO.org for more information on this topic.

This article brought to you by the Fair Housing Council; a civil rights organization. All rights reserved © 2016.

Federally protected classes under the Fair Housing Act include: race, color, national origin, religion, sex, familial status (children), and disability. Oregon law also protects marital status, source of income, sexual orientation, and domestic violence survivors. Additional protected classes have been added in particular geographic areas; visit www.FHCO.org for more information.

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Rental Housing Journal Colorado

4Q15 Market Overivew ...continued from page 6

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503-933-6437 Rental Housing Journal Colorado · March 2016