Multifamily on path to recovery
The apartment sector is a bright spot in the overall housing market leading the industry’s path to recovery. However, the lack of credit to finance the development of new apartments is likely to cause a supply and demand imbalance, said panelists during a press conference held today at the National Association of Home Builders (NAHB) International Builders’ Show (IBS) in Orlando, Fla.
NAHB says that multifamily housing demand will outpace current capacity to finance production and could put the brakes on the recovering industry. “While we are forecasting construction of 208,000 multifamily residences in 2012, that figure is well below the 350,000 units a year that is needed to maintain balance in the market,” said Sharon Dworkin Bell, NAHB senior vice president for multifamily and 50+ housing. “As the economy improves and first-time job entrants find employment, the need for apartments will continue to increase.”
The multifamily market suffered a serious slowdown in production from 2008–2010, notes the NAHB, causing an inadequate supply of new multifamily rentals. “We have one of the largest young adult populations entering the job market today,” said Ron Witten, president of the market research firm Witten Advisors that works with multifamily developers. “However, as an industry, we can’t keep up with this demand right now. This is likely to put inflationary pressure on rents, resulting in higher rents for consumers,” Witten cautioned reporters and other industry representatives attending the press conference.
Developer W. Dean Henry, president of Legacy Partners Residential in Foster City, Calif., and chairman of NAHB’s Multifamily Leadership Board, said he sees credit restrictions affecting recovery. “Capital is limited in this current market, and developers are having a difficult time obtaining the credit needed to finance the development of new apartments,” said Henry. “Credit restrictions are so tight that even developers with a strong balance sheet and reputation are having difficulty.”
Leaselytics brings apartment leasing into the 21st century
Leaselytics addresses the overwhelming challenge of analyzing leasing agents’ performance and getting actionable stats on them, currently missing from the multifamily tech world.
Leaselytics brings apartment leasing into the 21st century
One of the challenges of apartment leasing is that multifamily chains often use extremely outdated rent roll systems and independent apartment management companies struggle to use technology at all. While there are shining examples of modernity, they are extremely rare, and the attitude nationally tends to be that not only is the current system “okay,” it is too big of a challenge to teach staff a new system and transfer data from point A to point B.
Beyond that, there are holes in the technologies even offered, one of which is apartment leasing agent performance analytics. Until now. Leaselytics has launched as a software as a service (Saas) company to fill in the gap by offering performance data with modern tools and a streamlined interface that a toddler could understand (read: your staff won’t struggle to understand it).
Rob Whitley, Founder and CEO of Leaselytics tells AGBeat, “Imagine a baseball manager trying to create the best line-up of players without knowing their performance stats. It would be impossible. They’d lose every game. This is the same problem that apartment management companies have with their leasing agents.”
A $350B industry running on dinosaur-era technologies
Whitley notes that the apartment industry is a 350 Billion per year industry, with 44 Million rentals in the U.S. Leaselytics allows apartment management companies to tie performance data of leasing agents to financial performance of the portfolio. Companies can track leasing agent performance through intuitive visualizations and optimize how leasing agents are used, resulting in reduced attrition, higher occupancy rates – driving higher profits.
“We have a couple proprietary elements including: a score metric for leasing agents, and a feature called Placement Optimization which allows companies to have right leasing agents, in the right place, at the right time,” Whitley concludes.
This is a tool that could be so dramatically helpful to multifamily brands, that as it becomes mainstream, it will become quickly evident which brands have put themselves at a disadvantage by not adopting it.
Quick photo tour:
Lovely: apartment search by photo tool built in one weekend
As the visual web proves to be more than a trend, rather is the next evolution of the web, Lovely tinkers in their lab to put their mark on visual apartment hunting.
Riding the visual web train
We’ve been talking for some time about the rise of the visual web here at AG, noting that social networks are seeing higher interaction on status updates with photos (example: Facebook), and social media sites relying primarily on the visual element over text (example: Pinterest) paired with the burgeoning photo sharing apps that come standard with any smartphone (example: Instagram), the online community is trading in prose for photos.
At the top of the page, a user chooses their desired city and neighborhood with more cities covered every month. Then, results can be filtered by price and number of rooms, which presents rows of images from search results, which, let’s face it, is the next most important information besides price, location, and size filters.
Each image can be clicked for more results, and users can go on to see all of the listing’s results. The tool is not universally useful, but for those just getting started on their search, it is a great way to get a feel for what’s on the market, or what a neighborhood is like, or even what kind of quality can be expected in a specific price range.
Maps were the 2008 revolution. Visual is so NOW.
Just as map search became the hot ticket for apartment/rental search sites in 2008, visual search results are going to be the hot ticket for 2013, but Lovely’s tinkering put them a step ahead of the trend. After decades of lame websites filled with walls of words in ten point font, the ease of searching visually is finally coming to fruition – watch for more to follow in short order.
Multifamily builder and developer sentiment hits seven year high
Multifamily players such as builders and developers are feeling more positively about the sector, despite “continuing difficulties.”
Developers and builders are more optimistic
The the National Association of Home Builders (NAHB) Multifamily Production Index (MPI) reached a seven year high, recording its highest reading since the third quarter of 2005 with an index of 51, measuring developer and builder sentiment about current conditions in the multifamily market on a scale of 100. The MPI rose 2.0 percent from the fourth quarter to the first, marking the seventh consecutive quarter of increases.
[ba-pullquote align=”right”]The MPI rose 2.0 percent from the fourth quarter to the first, marking the seventh consecutive quarter of increases.[/ba-pullquote]The MPI provides a composite measure of three key elements of the multifamily housing market: construction of low-rent units, market-rate rental units and “for-sale” units, or condominiums. The index and all of its components are scaled so that any number over 50 indicates that more respondents report conditions are improving than report conditions are getting worse.
In the first quarter of 2012, the MPI component tracking builder and developer perceptions of market-rate rental properties recorded an all-time high of 69, while low-rent units dipped slightly to 53. For-sale units increased to 37, which is the highest reading for this component since the fourth quarter of 2005.
Construction continues despite difficulties
[ba-pullquote align=”right”]”In spite of continuing difficulties in the capital markets, it appears that new construction is underway.” -W. Dean Henry[/ba-pullquote]”In spite of continuing difficulties in the capital markets, it appears that new construction is underway,” said W. Dean Henry, president of Legacy Partners Residential in Foster City, Calif., and chairman of NAHB’s Multifamily Leadership Board. “This is certain to help satisfy some of the pent up demand that has occurred over the past several years.”
The Multifamily Vacancy Index (MVI), which measures the multifamily housing industry’s perception of vacancies, dropped to a level of 31, the lowest recording since the inception of the index in 2003. With the MVI, lower numbers indicate fewer vacancies. The MVI has decreased considerably in the last three years, after peaking at 70 in the second quarter of 2009.
“Multifamily construction continues to be a bright spot in the overall housing market,” said NAHB Chief Economist David Crowe. “However, as indicated by the MVI, demand for apartments is now quite high, and production is still very low in a historic context and in the context of what we project is necessary to meet long-term demand.”
Historically, the MPI and MVI have performed well as leading indicators of U.S. Census figures for multifamily starts and vacancy rates, providing information on likely movement in the Census figures one to three quarters in advance.
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