Scott Holmes

Really interesting article from Greg Lyon of Nadel Architects regarding office to multi family conversions and potential solutions for vacancy in the urban core. 𝐏𝐚𝐫𝐚𝐥𝐥𝐞𝐥𝐬 𝐭𝐨 𝐨𝐮𝐫 𝐰𝐨𝐫𝐥𝐝 𝐢𝐧 𝐭𝐡𝐞 𝐍𝐖: ·        In downtown Tacoma, three ownership groups have committed to multi family conversions of large-scale office properties. One is successfully completed and stabilized, two are in process and an additional building is on the market with the potential for conversion.   ·        In downtown Seattle, the Queen Anne Plaza building and the former Seattle Post-Intelligencer building have recently traded for residential conversion. We anticipate that we will continue to see Class B and C buildings trade at a low enough basis to justify residential conversions.   ·        Greg mentions that the suburban office market should also be viewed as an opportunity for residential conversion, and we would agree. We currently have a client in the process of converting a suburban office building to residential, and we think this trend will begin to gain momentum.   ·        Another solution for absorbing vacancy in the urban core is catering to the smaller square footage office tenants. The sub 10,000 SF tenants are significantly more active than the larger square footage. We are currently working with ownership groups to multi-tenant floors and deliver spec suites in order to simplify the process for tenants. Drew Frame Kathleen Afichuk https://kmteamframe.com/

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It has been remarkable to witness the resiliency of the local multifamily market over the past few years. However, this report from CoStar describes the shifting environment that many of us are witnessing. According to CoStar, Q1 2024 had the lowest sales velocity since 2011, with less than 45 market-rate sales in the region. The article also states that "uncertainty has been one of the leading concerns among local investors – rent growth, demand, ballot initiatives, interest rates, city-level proposals, etc. – and it will likely weigh on investor sentiment through 2024." How will the rest of this year play out?

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The least affordable metro area for America’s middle class: San Jose-Sunnyvale-Santa Clara "The San Jose-Sunnyvale-Santa Clara metro area in California is the least affordable for all middle-class income ranges in the U.S., according to the report." - To afford a house in the San Jose area, you will need to make $468,252 — the highest of all 221 U.S. metro markets surveyed in an April National Association of Realtors report. - In addition, the average San Jose home value is $1,461,923, up 10.1% over the past year, according to Zillow. - In its report, Creditnews Research warns that the San Jose-Sunnyvale-Santa Clara metro area runs the risk of becoming a “donut city” as rising costs lead to a “wave of out-migration where residents and businesses relocate to the suburbs.” https://lnkd.in/g5BP6b2X

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Client question: How about those Q1 Bay Area Multifamily figures? Answer: Download available in this link & highlights below! MARKET SUMMARY • This quarter, Bay Area regional positive demand resulted in a 1.40 absorption to completions ratio with 4,191 units absorbed compared to 2,987 units completed. •Year-over-year rent growth picked up slightly in San Francisco/Peninsula at 0.9%, were nearly flat in San Jose/Silicon Valley at -0.2%, and were sluggish in Oakland/East Bay at -1.4%. •San Francisco / Peninsula occupancy surprised at 95.4%, falling 40 basis points quarter-over-quarter. •The nine county Bay Area capital markets activity recorded a total investment volume of $1,281 million, marking a 20% year-over-year decline. The trailing four quarter average price per unit was $316,571, a 17% decrease year-over-year. Full report available per link below, and our team looks forward to applying CBRE's vigorous analytical underwriting & market experience to your property's mid-2024 Broker Opinion of Value! Big thanks to the outstanding CBRE Research team led by Konrad Knutsen, MBA, Giovanni G., Sean Walsh and our Investment Sales team led by Jon Teel, Adam Foley, and Ben Mollahan! #cbre #cbrecapitalmarkets #cbremultifamily #bayarea #bayarearealestate #multifamily #sanjose #oakland #sanfrancisco

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Today the Los Angeles County Board of Supervisors passed a measure that caps rent increases on rental units at 3% or 60% of the Consumer Price Index, whichever is lower for unincorporated Los Angeles. The ordinance applies to approximately to 51,700 rental units across 10,900 properties in unincorporated Los Angeles County, with a significant portion of these units located in South Los Angeles, East Los Angeles, and the San Gabriel Valley. This means that if CPI is 3%, rent increases would be capped at 1.8%. Over the past three years, mortgage interest rates have grown by more than 100%, utilities have grown by more than 50%, insurance has increased by more than 50%, labor costs have grown by more than 25%. These caps make it extremely challenging for landlords to operate. They do not account for increased operating costs, including rising insurance premiums, maintenance costs, and inflation. Furthermore, it will worsen the housing crisis and deter investment in rental properties. People think that it will decrease rental rates; however, it will have the exact opposite result. Expect that in Los Angeles there will be less units on the market (less supply), and as a result the demand will be higher - resulting in higher rents. This is a catastrophic result for the housing industry and a negative result for rental prices. We cannot solve our housing problem by instilling socialist market philosophies. We need to build more housing, and this measure will encourage less housing development in Los Angeles.

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California’s population grew in 2023, halting 3 years of decline, state estimates BY ADAM BEAM Updated 1:39 PM PDT, April 30, 2024 Share SACRAMENTO, Calif. (AP) — The nation’s most populous state is growing again, ending a trend of population decline that had dogged Gov. Gavin Newsom through much of his tenure. California gained just over 67,000 people last year, the first increase since 2019, according to an estimate released Tuesday by the state Department of Finance. After joining the United States in 1850 on the heels of a gold rush, California was a demographic marvel for its first 169 years — adding population every year as people flocked to the Golden State for its stunning terrain, weather and super-sized economy, which is larger than those of all but four countries. That streak ended in 2020, when California lost population for the first time during a pivotal census year that led to the state losing a congressional seat. Newsom’s partisan critics said the state’s high cost of living, uncertain power supply, a housing and homelessness crisis and concerns about crime were partly to blame. For a two-year period, Californians moving to Texas made up the largest state-to-state movement in the U.S., according to U.S. Census data — a fact often shared by Republicans eager to slam Newsom.

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"Enter Assembly Bill (A.B.) 1893, authored by Assembly member Buffy Wicks (D–Berkeley) and supported by California Attorney General Rob Bonta, which aims to make the builder's remedy process more predictable and functional for #developers and a little less scary and offensive for #cities." "Wicks' bill attempts to clarify the kinds of standards local governments can apply to #buildersremedy projects, streamline project approvals, and lessen project costs. For cities, Wicks' bill would impose #density caps on builder's remedy projects and limit the areas where they could be built." A.B. 1893 has passed the California Assembly and is currently being considered by the California Senate. https://lnkd.in/ghVj-UnR

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The aggregate share of single-family homes owned by investors shifted across 52 of the nation’s largest metro-area housing markets between March 2021 and March 2024. Among the 52 metro-area housing markets measured by Parcl Labs, these 5 saw the investor share of single-family ownership rise the most: Memphis: +1.46 percentage point Atlanta: +1.32 percentage point Birmingham: +1.32 percentage point Indianapolis: +1.21 percentage point Charlotte: +1.04 percentage point Among the 52 metro-area housing markets measured by Parcl Labs, these 5 saw the investor share of single-family ownership fall the most: San Francisco: -4.05 percentage point San Jose: -3.95 percentage point San Diego: -3.84 percentage point Sacramento: -3.95 percentage point Los Angeles: -3.20 percentage point https://lnkd.in/egaawtG2

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Monday Market View Dashboards - For Lease - Inland Empire Focus (Day late as I was traveling!) Inland Empire - 10k -100k Sqft For Lease ➡ ~382 Prop/Space Available - ⬆+21 from April ➡ $1.49psf Avg asking Lease Rate - ⬇ ($.07) from April ➡ ~14.38m Sqft Available - ⬆ ~.77m sqft from April ➡ ~1.89m Sqft Available for Sublease - ⬆ +.28m sqft from April ➡ 252 Avg Days on Market - ⬇ -15 Days from April 📢 31% of available building/space is 10k-20k sqft (119) & 26% is 50k-100k sqft (100). Check out the pie chart for size segment %'s. Top 3️⃣ Cities with the most product: Ontario, Rancho Cucamonga, and Riverside/Corona tied for the 3rd position. IE has some really great opportunities and strong challenges (depending on what side of the deal you're on). Sign of the times for sure - go Make it Happen. Cheers.....CJ SVN Vanguard Brock Smith

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Measure ULA, the so-called “mansion tax” on property sales of greater than $5 million that took effect last April, has “significantly” reduced sales of apartment buildings in Los Angeles and the San Fernando Valley, according to a report from NAI Capital Commercial. In LA, wrote NAI Capital Commercial’s J.C. Casillas, sales volume for these properties plummeted by 71% year-over-year in 2023, “with the number of deals sharply declining by 85% compared to the previous year.” #cre #multifamily

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16 UNITS | SANTA ANA | JUST LISTED Contact Rick Applebaum of Morgan Skenderian Investment Real Estate Group for information. 949.500.5099 or at rma@morganskenderian.com. ABOUT THE PROPERTY: This property features (16) spacious 1BR/1BA-Jr. units, averaging ±700 SF. Residents will enjoy covered parking, patios, balconies, and A/C, making this an attractive prospect for the discerning investor seeking a lucrative addition to their portfolio. HIGHLIGHTS -8.7% CAP Rate on Market Rents -Large One-Bedroom Jr.’s Averaging ±700 SF -Built in 1979 -$224,688 Price Per Unit -Approximately $104,000 in Recent Capital Improvements -Covered Parking, Patios, Balconies, A/C #multifamily #multifamilyinvesting #multifamilyrealestate #rentalproperty #orangecountyrealestate #apartmentinvesting #commercialrealestate #investmentrealestate #santaana #1031exchange #morganskenderian #santanarealestate #apartments #apartmentinvesting

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This doesn't seem like a sustainable trend for prospective homebuyers in California....let alone a first-time homebuyer! Better be earning well over 200K annually. "There’s a steep price to California’s record pricing – a broad lack of affordability. The association reported the number of California homebuyers in April was below 300,000 for the 19th consecutive month. Homebuying in the state has averaged 402,000 sales a month since 1990" In a state with over 39 Million individuals (as of 2022), having less than 300,000 potential homebuyers is tell-tale sign of a big problem. #sharafreport #california https://lnkd.in/gSwZgzVu

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