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Residential Forecast 2009 Cindy Clare, CPM President, Kettler Management

Residential Forecast 2009 Cindy Clare, CPM President, Kettler Management. January 27, 2009. MARKET FOR 2009. What a difference a year makes! Impact of the decline in the economy Impact of the election How will the credit crunch impact the apartment industry?. ECONOMY.

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Residential Forecast 2009 Cindy Clare, CPM President, Kettler Management

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  1. Residential Forecast 2009Cindy Clare, CPMPresident, Kettler Management January 27, 2009

  2. MARKET FOR 2009 • What a difference a year makes! • Impact of the decline in the economy • Impact of the election • How will the credit crunch impact the • apartment industry?

  3. ECONOMY • The implosion of the financial markets • impacted everyone • Renters are being more cautious, and • much more price sensitive • Renters are taking smaller units, but not • doubling up “yet” • Silver Lining – the bailout may bring more • jobs to Washington

  4. ELECTION • The change in administration brought • “hope” to the nation • Immediate increase in leasing after the • election • Will it continue?

  5. WHAT DOES THIS MEAN FOR RENTALS? • Slower absorption pace at lease-up • properties (average 15 per month) • Rental concessions will continue and • will increase in 2009 • Increased vacancy in both product types • Limited to no rent growth in strong • sub-markets, rent reductions in other • sub-markets

  6. 2008 RENTAL RESULTS • Vacancy increased in VA, MD, and DC • Class A vacancy increased to 4.4% • Small increase in rents of 1.3%, decrease • in high-rise rents • Class A absorption dropped from 17 to 15 • units per month • There are currently 51 apartment • communities in lease-up in the Washington • Metropolitan Region • Concessions continue to increase; • Class A 5.7%

  7. 2008 RENTAL RESULTS • Supply beginning to stabilize as reversions • slow down and new construction is • delayed • Rentals in No. VA were up 1.5% • Rentals in Rockville and Bethesda, MD • were down 2.4%. However, rentals in Silver • Spring, MD were up 5.1% • Rentals in DC were down 0.7% • Shadow market is not having as much • impact in the outer suburbs

  8. 2009 RENTAL FORECAST – No. VA • Concessions will continue and will increase in all sub- • markets. Additional spreading of concessions as absorption • slows • Rent growth is unlikely in any product type. Although there • may be an opportunity to raise rents on particular unit types • (smaller units) • Vacancy will edge up everywhere • Location and quality will be key for new product. Unique • features will become increasingly important • Properties located near mass transit will continue to hold up • better than other product • Pipeline may continue to be reduced as new construction is • delayed due to lack of financing • Turnover should slow as buyers will need more money • down to buy. However, those that have cash may see 2009 • as an “opportunity”

  9. 2009 RENTAL FORECAST - DC • 25% increase in apartment supply in 2008 • will impact occupancy in 2009 • There will not be rent growth • Reversions will continue to impact the • market and could affect absorption • depending on timing • Vacancy will increase slightly • Concessions will continue to increase as • lease-ups are introduced into the market

  10. 2009 RENTAL FORECAST - MD • Concessions will increase and spreading of • concessions will continue as absorption • slows • Rents will be flat • Properties near mass transit and close in • locations will do better than outlying • suburbs • Vacancy will continue to increase

  11. 2009 SUB-MARKET RECAP • Near-term pipeline is imposing but upon closer review some • markets may perform better than others • Currently Washington, D.C. itself is saturated with failed condo • projects and new apartments • - Poor locations are forced to offer steep concessions, • dragging down all new communities who are forced to • match • - Concessions and price cuts are bringing some communities • inline with new product in Arlington—Ballpark vs. Pentagon City • Most Fairfax County supply will be absorbed by the first half of 2010 • Arlington has been hard hit by condo reversions however virtually all • of these projects will be leased up by early 2009 • Which will be followed by another 2,900 units delivering over the next • 18 months—however most new deliveries are in secondary • locations, many without Metro

  12. ITEMS TO WATCH IN 2009 • Increase in delinquencies particularly in the • B market • - Hold fast on credit standards in • order to avoid the pitfalls of the • “for sale” market • “Let’s make a Deal” as absorption slows • - Focus on retention of existing • residents

  13. SUMMARY • 2009 will be a slow market, but not a sharp • decline • The Washington Metro market will continue • to be desirable due to a stronger economy • than the majority of the country • While the market will be declining from our • standpoint, it is still much stronger than • many areas of the country

  14. THANK YOU

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