Ray Hankamer's Recap of the O'Connor & Associates Apartment Forecast Luncheon

O'Connor & Associates Hotel/Lodging Forecast Luncheon
by Ray Hankamer

(L to R) Sergio Pineda and Ray Hankamer both with Hankamer & Associates

O’Connor & Associates Apartment Forecast Luncheon featured speaker Jason Espejo, of Lynd Company.

Mr. Espejo had the following comments about the Texas multi-family market in general, and more specifically about Houston:

·         For several years before the recession, traditional renters came to believe they had a “right” to home ownership

·         Many good and bad renters alike became “bad” homeowners, which led to many problems which lenders are still dealing with

·         Hopefully it will be a long time before we return to loose lending standards which do not require prudent down payments and strong credit

·         Lenders nationwide are inundated with forbearance requests on many types of commercial real estate, including multi-family, and therefore are slow to respond

·         Jobs are key to a strong market in any city-Texas cities are among the strongest in job creation

·         We can expect growth in multi-family development in most Texas markets, especially Austin, which may risk going overboard, with 22,000 new units planned; Dallas: 8,200; Houston: 13,000. These latter two metros should be able to absorb growth without rental rates or occupancies weakening

·         The “stigma” of being a renter is abating, and we are returning toward normal percentages of 60% homeowners and 40% renters

·         Houston growth will come near Woodlands/Exxon Mobil campus; Cinco Ranch; Katy…lots of good sub-markets for multi-family here

·         Speaker’s company owns 35,000 units nationwide (7,000 in greater Houston) and is aggressively ramping up pricing on renewal rents, and giving incentives to longer term new tenants to encourage reduced turnover and stability

·         Renewal percentage has dropped from 70% to mid-60’s but speaker says it is worth it to drive rate, as demand for multi-family increases

·         Lower construction costs for stick-built enables apartment owners to demand lower insurance coverage and thus premiums

·         Multi-family should be most attractive real estate segment for coming few years

·         It is a good time to be a buyer of real estate assets now since capital costs are so low-“the stars are aligned”

·         Speaker is bullish on Houston but not so much on DFW Metroplex