A report from the Dallas Morning News in Texas. “Dallas-Fort Worth is the country’s top apartment building market with more than 26,000 new rental units opening this year. Another 16,000 apartments are set to open their doors in Houston in 2020. ‘Are we overbuilding or are we not building enough?’ asked Jeanette Rice, head of multifamily research for CBRE. ‘My worry about Dallas and for that matter all the Texas market is the construction pipeline. We have enormous apartment demand but a lot of supply,’ she said. ‘It’s probably too much short term. It’s very likely not enough long term.’”
“Rice said most of the apartments being built in Texas are higher-cost units, not the more affordable rental units that are in short supply. ‘A lot of the new supply doesn’t match the demand,’ she said.”
The Austin American Statesman in Texas. “Amid Central Texas’ ongoing job and population growth, the Austin-area apartment market continued its upward climb last year. And experts say they don’t see a slowdown in sight, although tenants might feel some relief this year as the pace of rent growth is expected to slow. Once again — for the fourth consecutive year — developers added more than 10,000 apartment units to the existing inventory, said Charles Heimsath, president of Capitol Market Research.”
“More than 25,000 apartment units are under construction, with half of those likely to open this year, according to Capitol Market Research. That means it is possible that the Austin area this year will see the highest number of units ever completed in a 12-month period, Heimsath said, which could mean ‘a risk of a decline in occupancy and slower rent growth.’”
“In another year-end report on the local market, Robin Davis with Austin Investor Interests, said that in the fourth quarter alone, more than 3,300 new apartments units were added, the highest number of new completions in more than three years. There are about 28,580 units under construction among all property types, according to Davis. Another 27,800 units have entered the permitting process or are already approved and ready to break ground, she wrote.”
“‘It remains to be seen how many of these will come to fruition, but the pipeline is unyielding and with more 56,000 units already underway or pending a start, there is certainly room for caution as Austin is well known for its boom/bust cycles,’ Davis wrote.”
From Curbed San Francisco in California. “Something is rotten in Hayes Valley, or at least that’s what the San Francisco City Attorney’s Office suspects. On Thursday the city attorney issued a barrage of subpoenas that threaten to ensnare a long-delayed mixed-use project in that neighborhood in the ongoing City Hall corruption scandal focused on ex-Public Works chief Mohammed Nuru.”
“The development at 555 Fulton Street has been something of an enigma, backed by an overseas developer but plagued by mysterious delays that have kept it in limbo for more than five years. This five-story, 139-unit mixed-use development in Hayes Valley broke ground in 2014. It comes with one-, two-, and three-bed condos starting at $889,000 and up to more than $1.2 million, advertising to deep-pocketed buyers looking for ‘contemporary and convenient luxury’ homes in SF’s trendiest neighborhood.”
“Although the name of the developer is Fulton Street Ventures, in reality Chinese mega-developer R&F Properties is behind the building, designed by architect Ian Birchill. But the most newsworthy thing about 555 Fulton is the mystifying amount of time construction has taken, largely on account of arguments with the city over alleged changes to its design in the midst of construction. The San Francisco Chronicle reported in 2018 that as many as 30 buyers walked out on purchases at 555 Fulton because they got tired of waiting.”
“The holdup frustrated both neighbors and the city because a big part of the appeal of the building was that it includes a much-needed grocery store in Hayes Valley that couldn’t open until construction finished. Nor is it open now; the building remains unfinished. In January, the FBI arrested Nuru on fraud charges, with a 79-page complaint alleging that he tried to reward friends with lucrative city contracts, accepted gifts as bribes from developers and offered bribes to others, used city employees to work on his vacation home, and lied to the FBI.”
“Nuru resigned as head of Public Works earlier this month; Mayor London Breed said for legal reasons it was impossible to fire him sooner. Now the affair has expanded to potentially ensnare permit expediter Walter Wong and R&F executive Zhang Li. For the record, Nuru hasn’t admitted any crimes and has not yet been convicted of any criminal act. His attorney denies any wrongdoing on Nuru’s part.”
From Senior Housing News. “Three decades after the senior living industry got off the ground, providers are still ‘inventing a business,’ SRG Senior Living CEO Michael Grust believes. Grust is also concerned about ‘add water and stir’ management companies that are chasing fees in today’s frothy environment, with capital flooding into the sector.”
“On whether compressed margins are the new normal, given labor trends and other factors: ‘I wouldn’t accept that as a new baseline. Clearly, margin compression is something we’re facing right now, when there’s oversupply and rate growth is being challenged. Unfortunately, in certain markets, people are building new products, and I scratch my head sometimes because they come in and build it with cost of construction being what it is, it’s surging in some markets at still-incredible rates. I read a statistic the other day that the cost of construction is going up 1% a month almost in Texas. We just opened a building in Texas, and to a certain extent, we experienced that at the tail end.’”
From Bloomberg. “New York State’s sweeping tenant-protection law is causing headaches for Hamptons mansion owners who lease out their beachside spreads for the summer. The new rules prohibit landlords from collecting more than a month’s rent upfront. That is a problem in the Long Island resort towns, where home owners rely on three-month rental contracts in the hundreds of thousands of dollars, paid in full ahead of the season.”
“The law – aimed at keeping apartments affordable – took effect in June, but Hamptons home owners are only now catching up with its provisions as the peak leasing season gets under way. ‘The issue is you can get stuck with a tenant who pays for June, and once August comes around, doesn’t pay,’ said Frank Bodenchak, a rental and sales broker with Sotheby’s International Realty in the Hamptons. ‘The month of August through Labour Day might be worth as much as the other 11 months combined. These are big houses that require a lot of planning. You can’t rent these things last minute.’”
“When renting out her Southampton home the past two summers, Victoria Shtainer preferred taking a lesser amount for the entire season over having the onus of preparing for a new tenant each month. This year, she is selling her house – with its saunas, tennis and basketball courts, movie theatre and saltwater pool – for US$9 million. ‘I cannot rent it the way I used to,’ said Ms Shtainer, a Manhattan-based real estate agent with Compass. ‘I’m thinking about maybe becoming a tenant myself.’”