July CREW Corner (2): What’s Ahead for San Diego’s Multifamily Market?
By: Darcy Miramontes
July 14, 2014
Whether you're a landlord or a tenant, you've likely noticed some pretty powerful dynamics in San Diego's multifamily market right now. The primary trend drivers fall into four categories: jobs, the overall housing market, Baby Boomers and cap rates.
Millennials aged 25-34 years old – the largest renting demographic – are benefiting the most from the economy's accelerating recovery. According to the Bureau of Labor Statistics, Americans aged 25-34 years make up 17 percent of the U.S. population but accounted for 30 percent of the job gains made over the past 12 months. This growth of jobs will allow them to pay higher rents in more desirable parts of town, whether that be closer to their jobs or in trendy parts of town that offer the lifestyle they are looking for.
San Diego has the fifth largest concentration of Millennials in the United States; 27.1 percent of the metropolitan area's residents are between the ages of 18 and 34.
Young people are renting longer and buying their first homes later in life. Many factors contribute to this. The slow recovery after the recession hit young Americans hard when they otherwise would have been saving for their first home. Additionally, the rising cost of higher education means that young people with college degrees have record levels of student debt delaying home purchases until later in their careers. Furthermore, a cultural shift towards urban living makes apartment rentals in trendy parts of the city more attractive than suburban single-family homes.
The resurgence of apartment and condominium developments in addition to new retail and entertainment venues in downtown is helping to fuel this shift to urban living in San Diego. Downtown has seen 825 new apartment units delivered so far in 2014, and another 476 units are currently under construction.
Despite Millennials' stereotyped obsession with talking about themselves, it turns out that not everything revolves around them. The term "Millennial' has become a real estate buzz word and a necessary focus for the industry, but another great generation is making a significant impact on the multifamily market. Ten thousand Baby Boomers hit retirement age every day in the U.S., but many of them are too healthy and active for retirement communities. As Boomers look to downsize their homes or move to more desirable neighborhoods later in life, they are confronted with an inconvenient housing conundrum: many of them bought their homes in the 1980s and 1990s during the housing boom, but the younger generations have less desire and ability to buy these large suburban homes today. Faced with disappointing resale values, many Baby Boomers will opt to rent rather than buy as they relocate.
Cap Rates & Interest Rates
Don't be fooled into thinking that cap rates only follow interest rates. In fact, a study by Moody's Analytics found that during the seven periods of sustained interest rate growth between 1983 and 2013, cap rates actually compressed during five of these periods.
Historically, cap rates have also been heavily influenced by three other factors. First is credit availability. When banks are more likely to lend money for multifamily development, cap rates tend to fall. In our current climate, where it is hard to obtain financing, cap rates tend to trend up. Second is supply and demand. When apartment supply grows faster than demand for that product, cap rates tend to rise. In San Diego's supply-constrained market, cap rates are kept in check. Lastly is inflation. When the rise in interest rates is driven by inflation alone, real estate values tend to be negatively impacted. Recent interest rate hikes have been driven by improving economic trends such as rising net operating income in real estate, which helps to keep real estate values up and cap rates in check.
While the Fed is expected to start raising interest rates, local market conditions will continue to be more important to multifamily cap rates, especially in a supply-constrained market like San Diego. San Diego continues to have extremely low vacancy, and it will take a while before significant new supply starts to be constructed. Expect San Diego cap rates to remain below the national average.
Darcy Miramontes is Executive Vice President at JLL. For over 14 years, she has specialized in representing institutional and private clients of multifamily properties and development opportunities.
July CREW Corner (1): A young woman’s career in commercial real estate
By: Melissa Foster
Friday, July 11, 2014
Commercial real estate is a hidden gem of an opportunity for women. If more women knew about the dynamics and growth possibilities of a career in commercial real estate and what it has to offer both professionally and personally, I think there would be many more of us in the industry.
I am an associate of the San Diego division of CBRE Investment Properties, a specialty practice group within the CBRE Capital Markets Platform, with a focus on the private client sector of the investment properties arena.
Originally from Redondo Beach, I moved to San Diego in the summer of 2010 right after graduating from UC Santa Barbara with a BA in business economics. I had no real estate background and no personal or business connections in San Diego. While my undergraduate major provided me with solid analytical tools, it did not provide me a clear direction for my career.
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June CREW Corner: Is society demanding more women leaders?
By: Katie Yee
Friday, June 20, 2014
With female executives stepping up and making their voices heard, women now have many more role models to emulate. Women such as Mary Barra of General Motors, Sheryl Sandberg of Google and Virginia Rometty of IBM are becoming household names and furthering the debate of the female role in corporate America.
Government is also seeing an influx of women in high places. German chancellor Angela Merkel leads a long list of women both abroad and in the United States who hold high positions. What is prompting this increase of women in leadership roles, and how can women sustain this trend?
More women than men are seeking higher education, and the gender gap in college degrees is widening quickly. The trend started in 1978, when for the first time, more women than men earned associate's degrees. Over time, this trend was replicated for bachelor's and master's degrees.
By 2006, female domination of college degrees at every level was complete, with more women than men earning doctoral degrees. In 2009, there were 25 percent more female college graduates than male. For the graduating class of 2013, the Department of Education estimated that overall, 140 women graduated with a college degree at some level for every 100 men.
Do women's natural traits and tendencies better position them for the leadership roles of today and tomorrow? As the working environment evolves from the compartmentalization of talent to a team-based, collaborative approach, women's strengths seemingly tee them up for leadership roles.
April CREW Corner: Preparing the next generation of commercial real estate leaders
Friday, April 25, 2014
Jill Winchell, a principal of Jill Winchell Design, LLC, based in San Diego, an adjunct professor in the Interior Design Department at San Diego State University and an active member of CREW San Diego, recently talked with the editor of CREW Corner about preparing students for careers in design and real estate.
Q: What is UCREW and how does it bridge the gap between students and professionals?
A: UCREW is a nationwide community outreach program for local colleges and universities to bring exposure to the world of professionalism in the field of commercial real estate, sponsored by CREW Network. Providing exposure to new ideas and potential possibilities in the workplace are eye opening for students.
Our first San Diego UCREW event Urban Dash, held in March 2014 — was an excellent introduction to professionalism in the field from several arenas of commercial real estate and private industry. On our tour of many of the SD downtown icons â€“ Petco Park, the new library, Ballpark Village and others — our student participants were met at each location by seasoned professionals with introductions to networking and amazing information about the structures themselves.
Q: As an educator, what do you view as the biggest challenge(s) when preparing students for a career in contract design?
A: Both teaching and practicing in the design profession today are rapidly changing. Being astute to the involvement of the needs and provisions of cultures is critical. Assessment for clientele to provide best solutions and outcomes involves research to meet challenges of daily living environments, code requirements and cultures.
March CREW Corner: Remedies for gender imbalance in commercial real estate
Friday, April 4, 2014
Last year, Sheryl Sandberg's book "Lean In" took a look at women in traditionally male-dominated careers and encouraged women to challenge these norms and pursue their goals. Sandberg uses not only her own personal stories, but also research to highlight gender differences in the workplace and what we can do to change them.
CREW Network, the national organization which CREW San Diego is part of, began its own research in 2005 with the benchmark study "Women in Commercial Real Estate." CREW Network has followed up its research with annual white papers and in 2010 updated the benchmark study.
CREW San Diego brought Janet Pirrello, CREW Network board director, to San Diego in February to discuss with our members the white paper "Success & Satisfaction of Women in Commercial Real Estate: Retaining Exceptional Leaders." Although more women are entering the field of commercial real estate, women have a higher rate of career dissatisfaction and feel less successful than men.
March 20 Event Recap: Tenants, landlords join to find the right creative space
By: Samantha Henry, The Daily Transcript
Monday, March 24, 2014
Tenants are looking for a space that can serve as a catalyst for creativity, and buildings are being redesigned to fit those needs- but there is not a one-size-fits-all answer.
"We're actually not recommending clients go into open space. For some clients, it's appropriate, but not for every client," said Jeff Hollander of the Hollander Design Group. "We're spending a lot more time with the predictive index and personality types and not doing ‘one station fits all. Some people need open space and some people can't survive out there."
Hollander joined Tom van Betten, managing director of tenant representation at Cassidy Turley; Dick Balestri, senior vice president of CBRE; and Caroline Perry, associate general counsel for the San Diego Padres on a recent panel discussion moderated by Kellie Hill, senior project director at CBRE.
The event was hosted by CREW San Diego at the Skybox at DiamondView Towers.
Member News – Viveca Bissonnette, Hollander Design Group
By: Glenn Grant, The Daily Transcript
Wednesday, March 5, 2014
Interior design and cultural anthropology might seem like vastly different disciplines for one person. But for Viveca Bissonnette, having degrees in both has resulted in a rewarding career with an extensive portfolio of projects in both the private and public sectors.
The Canadian native is vice president and design principal at Hollander Design Group, the La Jolla-based firm she founded with architect Jeff Hollander in 2009.
“My first degree was a bachelor of arts in cultural anthropology from McGill University in Montreal, but I returned to school to obtain a second bachelor’s degree in interior design at the Design Institute of San Diego to satisfy my need for a more creative outlet.” she said.
“I use my cultural anthropology background as part of the workplace strategy and planning services we provide for our clients. There’s a lot more attention being paid to workplace culture and how organizations function and work together. We use ethnography- one of the basic tools of cultural anthropologists to observe and interview, resulting in an in-depth understating of our clients’ workplace culture. We spend time employing these tools at the beginning of the process, when we’re talking to a customer about a new space or analyzing how they work."
February CREW Corner: The art of procrastination
By: Bree Tsaniff
Friday, February 21, 2014
I used to be punctual. Early. Obnoxiously so, sometimes. I meticulously planned everything I did to accommodate traffic delays, coffee runs, getting stuck speaking to a long-winded associate at the end of a meeting â€” you name it. I met deadlines with days to spare. I was organized and I was proud of that fact.
Then I had children.
Throw everything I just said out the window along with a half-eaten peanut butter and jelly sandwich and my ability to make coherent conversation before 7:30 a.m. I briefly lost my mind, and still have issues with pregnancy brain four years later.
I'd like to think it' due to the fact that our surprise twin boys drain me twice as fast as a single child would. But it's probably the delayed effects of three sleepless years and not having quite conquered the delicate balance of motherhood and business. Let's face it, kids are cute, cuddly, adorable and awesome, but they wear you out.
January CREW Corner: Enjoy 2014′s optimism while it lasts
By: Teresa Warren
Friday, January 24, 2014
Every January for the past several years, San Diego's Commercial Real Estate Women of CREW have invited economist Joseph Quinlan to speak at the annual Economic Trends Forecast event.
Each year, Quinlan, who is managing director and chief market strategist of U.S. Trust, Bank of America Private Wealth Management, shares his perspectives and predictions. Some years the presentation is positive and some years, not so much. The 2014 comments were upbeat and encouraged confidence in the economy. Quinlan warns, however, that we shouldn't get too comfortable.
Nearly six years ago, in the fall of 2008, times were bad and getting worse. Dark times followed and now, in retrospect, we have a benchmark for how things have improved. Today we are looking at a good economy, so much so that no economists are forecasting a recession for this year.
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