Multifamily Boom Extends into '16. Here's Why. (Hint: Jobs)
Demand is steady, rents are still rising, and affordability is a pressing problem in Seattle's multifamily market—and so is the cost of land and construction (for developers; owners of existing properties aren't too worried). Those were some takeaways at Bisnow's Seattle Multifamily event at the Hyatt Olive 8 on Monday.
Keynoting the event were McCullough Hill Leary attorney John McCullough and Leslie Price, senior policy adviser at the Mayor's Office of Policy & Innovation, who detailed HALA—the city's Housing Affordability and Livability Agenda. The 28-member committee that drafted the plan set the goal of a city in which people who work here can afford to live here, via the creation of 30,000 new market-rate units, as well as the creation or preservation of 20,000 affordable units in 10 years: a tall order. Among many other things, it means increasing the housing levy, looking for more resources at the federal and state levels, and partnering with faith-based organizations and nonprofit and for-profit developers.
Our speakers noted that jobs will continue to drive residential development—as many as a net 200,000 new jobs in the Puget Sound area over the next 10 years, by some estimates—but that's not all. Companies and talented employees are fleeing the hyper-expensive Bay Area for Seattle. Another severe downturn might put a damper on new supply, but it would have be a very bad shock. The Development Panel included Pine Street Group principal Matt Griffin; Continental Properties president Claudio Guincher; Mack Urban founding principal and CEO Paul Keller; Pillar Properties SVP Billy Pettit; Wolff Co VP Chris Rossman; and ENCORE Architects principal Andrew Hoyer, who moderated.
Owners are spending a lot more time on asset and property management than they used to, trying to keep their properties competitive, since renters' expectations are rising as rents rise, our speakers explained. In fact, it's getting harder to keep up with expectations, at least among the coveted renters-by-choice. Another complicating factor: Tastes are also a bit different between Millennials and Baby Boomers, both of whom want to live in the city. In short, owners need to be flexible.
Construction finance for the region's many multifamily projects is being provided mainly by banks, insurance companies and pension funds. Short-term loans are common for developers who look to sell, longer (seven to 12 years) for those planning to hold—depending on borrower demand. Underwriting terms vary widely, with some lenders, especially banks, acting aggressively to put their funds out now. Construction costs are moving up dramatically, however, and some projects simply aren't penciling. The Finance Panel included CBRE first VP James Bach; Hunt Mortgage Group VP Jeff Ballaine; Newmark Realty Capital principal Mike Taylor; GP Realty president Greg Piantanida; and Walker & Dunlop SVP Craig Russell, who moderated.