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Portland Rents Article

By
Real Estate Agent with Real Pro NW.com

Here is a great article I found about Portland, OR Rents, written by Beth DuPont. 

Your Realtor,
Phillip Neidhart
(503)626-6700

 

So, How Much Higher Can Rents Go?

Beth DuPont
Colliers International
223-3123
Beth.dupont@colliers.com

Portland's economy and the apartment investment market have been the bright spots in a very volatile environment this past year. But for how much longer?
Well, it depends --- the first part of 2008 has proven to be another strong investor market. But with noticeable differences.

• The "white hot" selling streak of condominium conversions is at a stand still. In fact, we now are seeing "bulk sales" of condominiums now being sold at apartment prices.

• The "shadow market" of this large inventory of condos (some estimates show more than 1,000+ condos for sale in the market ) combined with the continued slow down of the single-family home sales is definitely affecting the apartment rental market.

• Concessions are popping up in certain product types and geographic areas. Higher-end apartments are having a difficult time competing with condominium and single family home rentals.

• The disconnect between buyers and sellers continues to narrow. Investors are weighing their investment purchases on fundamentals-does it "cash flow"-and not on speculative appreciation.

• Pressure continues on the seller side for realistic cap rates to prevail, which will help realign sale prices.

• Banks are underwriting the deals based on actual performance with 25%-35% down payments. The days of "interest only" loans are gone.

• With the continued upward spiral of utilities, owners are fighting back with "utility bill back" programs and other fees that aren't reflected in the overall rent, but help level the paying field between owner and tenant.

• At the same time, soaring gas prices are forcing tenants to make decisions to live closer to their jobs and mass transit.

Many owners are still able to increase rents by 7%-15% on turnover and existing rents, with vacancies holding around 3% or less. And they continue to see good cash flow on their properties.
Construction of apartment buildings is pushing toward the west and southwest metro suburbs. Trammel Crow Residential plans to break ground this fall on a $50 million suburban apartment complex in the Durham/Tualatin area. The 368-unit Alexan Bridgeport will be built near the popular Bridgeport Village shopping center. Trammel Crow has three other apartment projects in construction in the greater Portland area, including The Alexan South waterfront, North Mississippi and in Wilsonville at Villebois. Developers of Arbor Homes, Bethany Village and Steed Development are working on mixed use projects, with strong apartment components in the Hillsboro suburb. In another signal of confidence in the apartment market, Mark Edlen of Gerding Edlen, announced recently that their 3720 building on South Waterfront, with 323 units, will open as an apartment building in late summer.

The Portland Economy
The Portland metro economy continues to hold up well. Last year, Portland added over 22,000 jobs and had a growth rate of 2.1%. The first part of 2008 shows employment up 1.8% over the year. All major industries, except manufacturing, are in the black. The housing market continues to be a drag on the economy, and will impact growth not only in construction, but also in wood products, banking, real estate and retail. This, combined with the credit crunch, is making the pain worse. The petroleum issue continues to impact all, and there doesn't appear to be an end in sight. People are definitely curtailing spending in other areas, in order to pay the higher gas prices.
Analysts expect this trend to continue throughout 2008 and mid- 2009-until the housing market settles down, and oil prices stabilize.

Remainder of 2008
We expect the 2008 apartment market to continue as a good investment market, as long as sellers are realistic about sales price. However, prices may not be as aggressive as in previous years due to the demanding underwriting criteria for loans and the credit crunch.
The smart investor understands the value of selling their property after it achieves market rents and produces a strong cash flow. And in today's market, these two elements are necessary for achieving a good sale price.

 

 

If you are considering a real estate investment, please call me.

Your Realtor,
Phillip Neidhart
(503)626-6700

 

 

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