GREATER CINCINNATI
Greater CINCINNATI Apartment report FIRST HALF 2010
www.cbre.com/mhgic
Market perspective In the past 24 months, much attention has been focused on the capital markets and their impact on the multi-housing market both locally and nationally. The effects of the recent global financial crisis and necessary de-leveraging currently underway will be felt for some time to come. Discussions are now centered on the necessary steps for a recovery to take hold and on identifying the indicators along the way. The most likely path leading to prosperity in multi-housing will involve an increase in demand for rental housing. There are several key indicators to observe, including population trends and household formation, but the number one indicator for rental demand is employment. An examination of changes in employment levels in Greater Cincinnati in the past 10 years showed generally positive growth began in 2001 and extended through 2007. At that point, the bottom severely fell in 2008 and 2009, wiping out almost all employment gains from the past 10 years. These employment losses are reflected in the decline in occupancies from 91.5% at year-end 2007, to 88.4% as of year-end 2009. Greater Cincinnati Net Job Growth
overall housing costs. More renters will adopt roommate or shared living arrangements in order to reduce living costs. Another strategy for the 22-30 year old demographic is to “move back home with Mom and Dad.” According to CBRE Econometric Advisors, the Greater Cincinnati economy is expected to grow in 2010 with the addition of about 1,500 new jobs. Further projections show an average of positive job growth averaging 18,000 jobs from 2011 to 2014. This is when the recovery will take hold and it should be robust when it comes. Additionally, while demand has been weak over the past two years, supply also remained constrained and obsolete inventory continues to be removed from the market. The combination of increased demand and diminished supply should create positive pricing pressure. These improved fundamentals should come as a welcome relief to investors facing maturities and loan renewals. If inflation begins to take hold in the national economy, multi-housing investors will further benefit with the ability to adjust rental rate pricing on an ongoing basis.
rental market Although overall market occupancy remained fairly solid through the middle of 2009, reported at 90.4% in July, it was the cumulative effect of the preceding two years of job losses that brought leasing momentum to a grinding halt in the second half of 2009. This caused a year-over-year decline in occupancy by more than two full percentage points, to 88.4% as of December, according to the results of the CB Richard Ellis semi annual Rent and Occupancy Survey. This translates into approximately 3,000 fewer occupied units within a total inventory of approximately 150,000 units. Further analysis of the historical occupancy trend shows the posted 88.4% occupancy as Greater Cincinnati’s lowest posted year-end occupancy since 2002, yet another indication of the depth of the current national recession. Based on improving market fundamentals, CB Richard Ellis forecasts an increase in market occupancies to levels above 90.5 % in 2010. See historical rent and occupancy chart on page 3.
Source: CBRE Econometric Advisors
At the same time, population levels in the region have remained generally constant with some slight increases. So where have the renters gone? Some have bought houses, but even with the stimulus of the $8,000 tax credit, home sale transactions in the region declined from 34,000 at the peak in 2005 to 21,000 in the past year. When faced with lost or diminished employment, renters are quick to adjust by trimming their
Rental rates experienced a similar trend to occupancies through the course of 2009 despite posting a 1.4% year-overyear increase. In the first half of 2009, reported rents climbed from an average of $666 to $681 before tailing off at yearend to $675. The most likely reason for the disparity between falling occupancies and rising rents is that not all properties experienced an “average” year. One trend that became apparent in our survey was the wide dispersion of results across properties with a remarkable deviation from the mean.
©2010, CB Richard Ellis, Inc. We obtained the information above from sources we believe to be reliable. However, we have not verified its accuracy and make no guarantee, warranty or representation about it. It is submitted subject to the possibility of errors, omissions, change of price, rental or other conditions, prior sale, lease or financing, or withdrawal without notice. We include projections, opinions, assumptions or estimates for example only, and they may not represent current or future performance of the property. You and your tax and legal advisors should conduct your own investigation of the property and transaction.
greater cincinnati apartment market 2009 and 2008 :: comparative rent surveys OVERALL MARKET
Sub-Market Overall Northwest Northeast West East Northern Kentucky Central
Dec'08 $666 $657 $867 $517 $641 $629 $656
Average Rent July'09 Dec'09 $681 $675 $673 $654 $849 $804 $512 $516 $616 $675 $659 $654 $664 $690
2009 First Half Incr % 2.3% 2.4% -2.1% -1.0% -3.9% 4.8% 1.2%
2009 Second Half Incr % -0.9% -2.8% -5.3% 0.8% 9.6% -0.8% 3.9%
NORTHWEST Units Surveyed: Properties: Average Size: Market Vacancy: Market Eff. Rent: Market Rent/S.F.:
1BR/1BA 2BR/1BA 2BR/2BA 3BR
2009 Annual Incr % 1.4% -0.5% -7.3% -0.2% 5.3% 4.0% 5.2%
Dec 2008
Dec 2009
Units Surveyed: 53,119 Units Properties: 317 Average Size: 168 Units Market Vacancy: 9.4% Market Eff. Rent: $666 Market Rent/S.F.: $0.75
57,836 Units 297 195 Units 11.6% $675 $0.74
1BR/1BA 2BR/1BA 2BR/2BA 3BR
Dec 2008 Rent Per S.F. $566 $0.83 $604 $0.71 $849 $0.79 $927 $0.71
Dec 2009 Rent Per S.F. $573 $0.83 $599 $0.70 $822 $0.76 $904 $0.68
Chg.
1.4%
Annual Incr % 1.2% -0.8% -3.2% -2.5%
NORTHEAST Dec 2008 12,005 Units 57 211 Units 11.0% $657 $0.69 Dec 2008 Rent Per S.F. $549 $0.80 $624 $0.71 $785 $0.73 $846 $0.68
Dec 2009 12,154 Units 46 264 Units 12.2% $654 $0.67 Dec 2009 Rent Per S.F. $539 $0.76 $618 $0.71 $733 $0.69 $839 $0.69
Chg.
-0.5%
Units Surveyed: Properties: Average Size: Market Vacancy: Market Eff. Rent: Market Rent/S.F.:
Annual Incr % -1.8% -1.0% -6.6% -0.8%
WEST
1BR/1BA 2BR/1BA 2BR/2BA 3BR
Dec 2008 9,141 Units 41 223 Units 7.1% $867 $0.85 Dec 2008 Rent Per S.F. $701 $0.94 $719 $0.79 $926 $0.83 $1,199 $0.86
Dec 2009 11,234 Units 48 234 Units 10.2% $804 $0.81 Dec 2009 Rent Per S.F. $649 $0.88 $660 $0.75 $879 $0.79 $1,089 $0.83
Chg.
-7.3% Annual Incr % -7.4% -8.2% -5.1% -9.2%
EAST
Units Surveyed: Properties: Average Size: Market Vacancy: Market Eff. Rent: Market Rent/S.F.:
1BR/1BA 2BR/1BA 2BR/2BA 3BR
Dec 2008 6,888 Units 45 153 Units 12.9% $517 $0.67 Dec 2008 Rent Per S.F. $454 $0.74 $526 $0.66 $642 $0.68 $732 $0.59
Dec 2009 6,796 Units 33 206 Units 15.2% $516 $0.64
Chg.
-0.2%
Dec 2009 Annual Rent Per S.F. Incr % $445 $0.71 -2.0% $499 $0.61 -5.1% $734 $0.71 14.3% $654 $0.60 -10.7%
NORTHERN KY Units Surveyed: Properties: Average Size: Market Vacancy: Market Eff. Rent: Market Rent/S.F.:
1BR/1BA 2BR/1BA 2BR/2BA 3BR
Units Surveyed: Properties: Average Size: Market Vacancy: Market Eff. Rent: Market Rent/S.F.:
1BR/1BA 2BR/1BA 2BR/2BA 3BR
Dec 2008 7,306 Units 46 159 Units 7.2% $641 $0.74 Dec 2008 Rent Per S.F. $549 $0.79 $566 $0.66 $819 $0.79 $780 $0.62
Dec 2009 7,373 Units 44 168 Units 9.2% $675 $0.77 Dec 2009 Rent Per S.F. $569 $0.82 $609 $0.74 $818 $0.79 $848 $0.67
Chg.
5.3% Annual Incr % 3.6% 7.6% -0.1% 8.7%
CENTRAL Dec 2008 8,932 Units 51 175 Units 8.9% $629 $0.71 Dec 2008 Rent Per S.F. $564 $0.80 $594 $0.69 $758 $0.70 $756 $0.63
Dec 2009 10,146 Units 52 195 Units 12.0% $654 $0.69 Dec 2009 Rent Per S.F. $551 $0.78 $587 $0.67 $763 $0.69 $844 $0.63
Chg.
4.0% Annual Incr % -2.3% -1.2% 0.7% 11.6%
Units Surveyed: Properties: Average Size: Market Vacancy: Market Eff. Rent: Market Rent/S.F.:
1BR/1BA 2BR/1BA 2BR/2BA 3BR
Dec 2008 8,870 Units 83 107 Units 9.5% $656 $0.84 Dec 2008 Rent Per S.F. $577 $0.88 $660 $0.77 $987 $0.89 $981 $0.72
Dec 2009 10,133 Units 74 137 Units 11.6% $690 $0.83
Chg.
5.2%
Dec 2009 Annual Rent Per S.F. Incr % $610 $0.93 5.7% $683 $0.78 3.5% $980 $0.91 -0.7% $864 $0.59 -11.9%
selected sales second half 2009 Property Name
City
County
Sale Date Zip code Units Year Built Sale Price
Price/Unit Submarket
Eagles View / Hilltop
Cincinnati
Hamilton, OH
10/22/09
45213
196
1994
$3,500,000
$17,857
Cinti Central
The Metropole
Cincinnati
Hamilton, OH
11/03/09
45202
230
1912
$6,250,000
$27,174
Cinti Central
3440 Telford Street
Cincinnati
Hamilton, OH
11/20/09
45220
18
1930
$850,000
$47,222
Cinti Central
Clifton House
Cincinnati
Hamilton, OH
12/28/09
45220
57
1963
$1,302,500
$22,851
Cinti Central
Whispering Pines
Cincinnati
Hamilton, OH
09/29/09
45230
122
1972
$3,255,000
$26,680
Cinti East
Washington Bluffs
Cincinnati
Hamilton, OH
09/29/09
45230
52
1967
$1,604,250
$30,851
Cinti East
Carriage Station
Cincinnati
Hamilton, OH
10/1/09
45245
64
1985
$3,837,500
$59,961
Cinti East
Greens of Turfway
Florence
Boone, KY
07/01/09
41042
88
1992
$2,816,000
$32,000
Cinti N. KY.
Vista Pointe
Wilder
Campbell, KY
09/30/09
41071
98
1994
$2,800,000
$28,571
Cinti N. KY.
Columns on Wetherington
Florence
Boone, KY
11/14/09
41042
192
2003
$13,300,000
$69,271
Cinti N. KY.
Kenwood Park
Sycamore Twp
Hamilton, OH
12/04/09
45236
34
1963
$2,500,000
$73,529
Cinti N.E.
Twin Gables
Hamilton
Butler, OH
10/01/09
45011
60
1973
$660,000
$11,000
Cinti N.W.
Galbraith Pointe
Cincinnati
Hamilton, OH
10/05/09
45231
108
1994
$2,500,000
$23,148
Cinti N.W.
Belle Tower
Hamilton
Butler, OH
11/03/09
45011
120
1978
$3,880,000
$32,333
Cinti N.W.
Riverside Terrace
Cincinnati
Hamilton, OH
09/29/09
45233
73
1975
$1,743,750
$23,887
Cinti West
rental market continued Greater Cincinnati Year-End Historical Rent & Occupancy $680 94.1%
$666 92.7%
$675 $666
In light of minimal new supply being delivered in 2010, CB Richard Ellis forecasts an effective rent increase of 1.0% in the coming year as the local economy finds a footing and moves to recovery. The outlook for 2011 and 2012 appears even brighter as market fundamentals tighten further.
$648 $641
$631
$637 $626 $627
$611
91.5% 90.9%
The Northeast corridor experienced a drop in both occupancy and rents in the later half of last year. Rents and occupancies held steady through June but then rental activity diminished and concessions began to emerge. Quoted rents remained fairly constant but more than half of the properties in the Northeast corridor instituted pricing specials averaging onemonth free.
90.6%
89.5% 89.6% 89.7%
89.1%
88.4% 87.6% 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 Source: CB Richard Ellis
A significant number of better quality class A and B assets in good locations reported increased occupancies and rising rents. These properties have been the beneficiaries of the slowdown in home-buying in the region. On the other end of the spectrum, class C quality or worse assets struggled to find qualified renters. More than 20 properties in the region in operational or financial distress reported physical occupancies below 70%. Furthermore, several owners reported an increase in delinquencies and bad debt charge-offs due to the softened economy. In the second half of 2009, the East submarket reported an increase in average rents from $0.74 per SF to $0.77 per SF while at the same time vacancy climbed from 7.2% to 9.2%. Closer examination of the results showed dramatic increases in rents in newer assets with in-fill locations, while suburban rents noticeably declined.
investment market The investment market in Greater Cincinnati in 2009 saw a mere $84 million in sales, its lowest levels of trading activity since 1991. This is a 72% decline from the 2005 peak and a 70% decrease from the prior year. Lack of available financing for purchasers and a widening “bid-ask” spread between sellers and buyers were the two primary reasons. The roots of the slowdown began in the summer of 2008 and carried forward through 2009. In 2008, more than $200 million in sales occurred in the first half, slowing to $65 million in the second half. Very little inventory was brought to market in 2009 and the majority of trades occurred at levels below $10.0 million. Most 2009 sales had some flavor of distress. The Connor Group acquired two assets from the same lender in Northern Kentucky, the 301-unit Trellises and the 192-unit Columns on Wetherington. Miller Valentine acquired the Falls at Settlers Walk, 105 units in Springboro, after it fell into receivership. These transactions accounted for almost half of the total sale volume in the market. With so few transactions occurring, capitalization rates became difficult to quantify. Furthermore, because the few transactions clearing the market had some flavor of distress, they were
investment market (continued)
not meaningful in determining appropriate cap rates. By general consensus, cap rates were understood to have risen from historic lows, but investors, lenders and appraisers struggled to accurately quantify current rates. In the latter half of 2009 and early 2010, investor demand in the Midwest clearly indicated cap rates holding steady and in some cases decreasing based on bidding activity for Class A deals. Class B rates increased slightly and appeared to be ranging from 8.00% to 8.50%. Class C deals evidenced a wide spread from 9.50 to 11.00%, depending on condition and location. Sale activity is expected to increase in 2010 as lenders seek to resolve problem situations and more distressed deals are brought to market. We are not likely to experience trading volumes approaching Cincinnati’s long term average of $180 million, but $100 million in trades seems attainable. Most sellers will be lenders clearing balance sheets along with private investors facing maturities. Buy-side activity will be dominated by local and regional private players drawn to Cincinnati’s improving fundamentals and historically steady yields.
per year; and the five-year window from 2009 through 2013 indicates a further decrease to an average of only 600 units per year. In addition, multi-family housing supply will further tighten due to removals from inventory. The region has been removing or abandoning an average of more than 200 units of obsolete inventory in each of the past three years. This removal trend is likely to continue as more than 40,000 units in the region are in excess of 40 years old. Many of these older assets are good candidates for reinvestment but some will be too costly to resurrect. Development activity in the Cincinnati market will be led by purpose-built, student housing. Xavier University is underway with the construction of 550 new on-campus beds at Xavier Commons. Also, several new projects are slated to begin in Clifton adjoining the University of Cincinnati, including The Friars Club at McMillan Street and Ohio Avenue. The Friars Club will be the home to more than 200 new beds in a LEED-certified building developed by North American Properties with occupancy expected for the 2011-12 school year. Overall housing supply in the region is expected to continue tightening after single-family permits were down to 3,100 in 2009 from a highwater mark of more than 11,000 in 2005.
development pipeline The Greater Cincinnati multi-family development pipeline is very thin at the present time and is expected to remain relatively quiet for the next several years. According to the Census Bureau, only 327 multi-family permits were issued in 2009 in the Cincinnati SMSA. Tracking five-year increments reveals an interesting trend: From 1999 through 2003, Greater Cincinnati averaged more than 2,000 new apartment units per year; from 2004 through 2008, delivery volumes decreased by half to an average of 1,000 units
For more information, please contact:
CB Richard Ellis INDIANAPOLIS|CINCINNATI MULTI-HOUSING GROUP Dave Lockard First Vice President 513.369.1347 [email protected]
Steve LaMotte, Jr., CCIM Senior Vice President 317.269.1018 [email protected]
Amy Burmeister, CCIM Senior Associate 317.269.1166 [email protected]
Scott Oyler Senior Associate 513.369.1352 [email protected]
Dane Wilson Associate 317.269.1057 [email protected]
David Englert Financial Analyst 317.269.1034 [email protected]
Emily Cantley Sales Assistant 513.369.1328 [email protected]
Kelly Henderson Client Services Specialist 317.269.1064 [email protected]
Or visit our web site at: www.cbre.com/mhgic
201 East Fifth Street • Suite 1200 • Cincinnati, OH 45202 • T 513.369.1300 101 W. Washington Street • Suite 1000 • Indianapolis, IN 46204 • T 317.269.1000
www.cbre.com/mhgic
Market perspective In the past 24 months, much attention has been focused on the capital markets and their impact on the multi-housing market both locally and nationally. The effects of the recent global financial crisis and necessary de-leveraging currently underway will be felt for some time to come. Discussions are now centered on the necessary steps for a recovery to take hold and on identifying the indicators along the way. The most likely path leading to prosperity in multi-housing will involve an increase in demand for rental housing. There are several key indicators to observe, including population trends and household formation, but the number one indicator for rental demand is employment. An examination of changes in employment levels in Greater Cincinnati in the past 10 years showed generally positive growth began in 2001 and extended through 2007. At that point, the bottom severely fell in 2008 and 2009, wiping out almost all employment gains from the past 10 years. These employment losses are reflected in the decline in occupancies from 91.5% at year-end 2007, to 88.4% as of year-end 2009. Greater Cincinnati Net Job Growth
overall housing costs. More renters will adopt roommate or shared living arrangements in order to reduce living costs. Another strategy for the 22-30 year old demographic is to “move back home with Mom and Dad.” According to CBRE Econometric Advisors, the Greater Cincinnati economy is expected to grow in 2010 with the addition of about 1,500 new jobs. Further projections show an average of positive job growth averaging 18,000 jobs from 2011 to 2014. This is when the recovery will take hold and it should be robust when it comes. Additionally, while demand has been weak over the past two years, supply also remained constrained and obsolete inventory continues to be removed from the market. The combination of increased demand and diminished supply should create positive pricing pressure. These improved fundamentals should come as a welcome relief to investors facing maturities and loan renewals. If inflation begins to take hold in the national economy, multi-housing investors will further benefit with the ability to adjust rental rate pricing on an ongoing basis.
rental market Although overall market occupancy remained fairly solid through the middle of 2009, reported at 90.4% in July, it was the cumulative effect of the preceding two years of job losses that brought leasing momentum to a grinding halt in the second half of 2009. This caused a year-over-year decline in occupancy by more than two full percentage points, to 88.4% as of December, according to the results of the CB Richard Ellis semi annual Rent and Occupancy Survey. This translates into approximately 3,000 fewer occupied units within a total inventory of approximately 150,000 units. Further analysis of the historical occupancy trend shows the posted 88.4% occupancy as Greater Cincinnati’s lowest posted year-end occupancy since 2002, yet another indication of the depth of the current national recession. Based on improving market fundamentals, CB Richard Ellis forecasts an increase in market occupancies to levels above 90.5 % in 2010. See historical rent and occupancy chart on page 3.
Source: CBRE Econometric Advisors
At the same time, population levels in the region have remained generally constant with some slight increases. So where have the renters gone? Some have bought houses, but even with the stimulus of the $8,000 tax credit, home sale transactions in the region declined from 34,000 at the peak in 2005 to 21,000 in the past year. When faced with lost or diminished employment, renters are quick to adjust by trimming their
Rental rates experienced a similar trend to occupancies through the course of 2009 despite posting a 1.4% year-overyear increase. In the first half of 2009, reported rents climbed from an average of $666 to $681 before tailing off at yearend to $675. The most likely reason for the disparity between falling occupancies and rising rents is that not all properties experienced an “average” year. One trend that became apparent in our survey was the wide dispersion of results across properties with a remarkable deviation from the mean.
©2010, CB Richard Ellis, Inc. We obtained the information above from sources we believe to be reliable. However, we have not verified its accuracy and make no guarantee, warranty or representation about it. It is submitted subject to the possibility of errors, omissions, change of price, rental or other conditions, prior sale, lease or financing, or withdrawal without notice. We include projections, opinions, assumptions or estimates for example only, and they may not represent current or future performance of the property. You and your tax and legal advisors should conduct your own investigation of the property and transaction.
greater cincinnati apartment market 2009 and 2008 :: comparative rent surveys OVERALL MARKET
Sub-Market Overall Northwest Northeast West East Northern Kentucky Central
Dec'08 $666 $657 $867 $517 $641 $629 $656
Average Rent July'09 Dec'09 $681 $675 $673 $654 $849 $804 $512 $516 $616 $675 $659 $654 $664 $690
2009 First Half Incr % 2.3% 2.4% -2.1% -1.0% -3.9% 4.8% 1.2%
2009 Second Half Incr % -0.9% -2.8% -5.3% 0.8% 9.6% -0.8% 3.9%
NORTHWEST Units Surveyed: Properties: Average Size: Market Vacancy: Market Eff. Rent: Market Rent/S.F.:
1BR/1BA 2BR/1BA 2BR/2BA 3BR
2009 Annual Incr % 1.4% -0.5% -7.3% -0.2% 5.3% 4.0% 5.2%
Dec 2008
Dec 2009
Units Surveyed: 53,119 Units Properties: 317 Average Size: 168 Units Market Vacancy: 9.4% Market Eff. Rent: $666 Market Rent/S.F.: $0.75
57,836 Units 297 195 Units 11.6% $675 $0.74
1BR/1BA 2BR/1BA 2BR/2BA 3BR
Dec 2008 Rent Per S.F. $566 $0.83 $604 $0.71 $849 $0.79 $927 $0.71
Dec 2009 Rent Per S.F. $573 $0.83 $599 $0.70 $822 $0.76 $904 $0.68
Chg.
1.4%
Annual Incr % 1.2% -0.8% -3.2% -2.5%
NORTHEAST Dec 2008 12,005 Units 57 211 Units 11.0% $657 $0.69 Dec 2008 Rent Per S.F. $549 $0.80 $624 $0.71 $785 $0.73 $846 $0.68
Dec 2009 12,154 Units 46 264 Units 12.2% $654 $0.67 Dec 2009 Rent Per S.F. $539 $0.76 $618 $0.71 $733 $0.69 $839 $0.69
Chg.
-0.5%
Units Surveyed: Properties: Average Size: Market Vacancy: Market Eff. Rent: Market Rent/S.F.:
Annual Incr % -1.8% -1.0% -6.6% -0.8%
WEST
1BR/1BA 2BR/1BA 2BR/2BA 3BR
Dec 2008 9,141 Units 41 223 Units 7.1% $867 $0.85 Dec 2008 Rent Per S.F. $701 $0.94 $719 $0.79 $926 $0.83 $1,199 $0.86
Dec 2009 11,234 Units 48 234 Units 10.2% $804 $0.81 Dec 2009 Rent Per S.F. $649 $0.88 $660 $0.75 $879 $0.79 $1,089 $0.83
Chg.
-7.3% Annual Incr % -7.4% -8.2% -5.1% -9.2%
EAST
Units Surveyed: Properties: Average Size: Market Vacancy: Market Eff. Rent: Market Rent/S.F.:
1BR/1BA 2BR/1BA 2BR/2BA 3BR
Dec 2008 6,888 Units 45 153 Units 12.9% $517 $0.67 Dec 2008 Rent Per S.F. $454 $0.74 $526 $0.66 $642 $0.68 $732 $0.59
Dec 2009 6,796 Units 33 206 Units 15.2% $516 $0.64
Chg.
-0.2%
Dec 2009 Annual Rent Per S.F. Incr % $445 $0.71 -2.0% $499 $0.61 -5.1% $734 $0.71 14.3% $654 $0.60 -10.7%
NORTHERN KY Units Surveyed: Properties: Average Size: Market Vacancy: Market Eff. Rent: Market Rent/S.F.:
1BR/1BA 2BR/1BA 2BR/2BA 3BR
Units Surveyed: Properties: Average Size: Market Vacancy: Market Eff. Rent: Market Rent/S.F.:
1BR/1BA 2BR/1BA 2BR/2BA 3BR
Dec 2008 7,306 Units 46 159 Units 7.2% $641 $0.74 Dec 2008 Rent Per S.F. $549 $0.79 $566 $0.66 $819 $0.79 $780 $0.62
Dec 2009 7,373 Units 44 168 Units 9.2% $675 $0.77 Dec 2009 Rent Per S.F. $569 $0.82 $609 $0.74 $818 $0.79 $848 $0.67
Chg.
5.3% Annual Incr % 3.6% 7.6% -0.1% 8.7%
CENTRAL Dec 2008 8,932 Units 51 175 Units 8.9% $629 $0.71 Dec 2008 Rent Per S.F. $564 $0.80 $594 $0.69 $758 $0.70 $756 $0.63
Dec 2009 10,146 Units 52 195 Units 12.0% $654 $0.69 Dec 2009 Rent Per S.F. $551 $0.78 $587 $0.67 $763 $0.69 $844 $0.63
Chg.
4.0% Annual Incr % -2.3% -1.2% 0.7% 11.6%
Units Surveyed: Properties: Average Size: Market Vacancy: Market Eff. Rent: Market Rent/S.F.:
1BR/1BA 2BR/1BA 2BR/2BA 3BR
Dec 2008 8,870 Units 83 107 Units 9.5% $656 $0.84 Dec 2008 Rent Per S.F. $577 $0.88 $660 $0.77 $987 $0.89 $981 $0.72
Dec 2009 10,133 Units 74 137 Units 11.6% $690 $0.83
Chg.
5.2%
Dec 2009 Annual Rent Per S.F. Incr % $610 $0.93 5.7% $683 $0.78 3.5% $980 $0.91 -0.7% $864 $0.59 -11.9%
selected sales second half 2009 Property Name
City
County
Sale Date Zip code Units Year Built Sale Price
Price/Unit Submarket
Eagles View / Hilltop
Cincinnati
Hamilton, OH
10/22/09
45213
196
1994
$3,500,000
$17,857
Cinti Central
The Metropole
Cincinnati
Hamilton, OH
11/03/09
45202
230
1912
$6,250,000
$27,174
Cinti Central
3440 Telford Street
Cincinnati
Hamilton, OH
11/20/09
45220
18
1930
$850,000
$47,222
Cinti Central
Clifton House
Cincinnati
Hamilton, OH
12/28/09
45220
57
1963
$1,302,500
$22,851
Cinti Central
Whispering Pines
Cincinnati
Hamilton, OH
09/29/09
45230
122
1972
$3,255,000
$26,680
Cinti East
Washington Bluffs
Cincinnati
Hamilton, OH
09/29/09
45230
52
1967
$1,604,250
$30,851
Cinti East
Carriage Station
Cincinnati
Hamilton, OH
10/1/09
45245
64
1985
$3,837,500
$59,961
Cinti East
Greens of Turfway
Florence
Boone, KY
07/01/09
41042
88
1992
$2,816,000
$32,000
Cinti N. KY.
Vista Pointe
Wilder
Campbell, KY
09/30/09
41071
98
1994
$2,800,000
$28,571
Cinti N. KY.
Columns on Wetherington
Florence
Boone, KY
11/14/09
41042
192
2003
$13,300,000
$69,271
Cinti N. KY.
Kenwood Park
Sycamore Twp
Hamilton, OH
12/04/09
45236
34
1963
$2,500,000
$73,529
Cinti N.E.
Twin Gables
Hamilton
Butler, OH
10/01/09
45011
60
1973
$660,000
$11,000
Cinti N.W.
Galbraith Pointe
Cincinnati
Hamilton, OH
10/05/09
45231
108
1994
$2,500,000
$23,148
Cinti N.W.
Belle Tower
Hamilton
Butler, OH
11/03/09
45011
120
1978
$3,880,000
$32,333
Cinti N.W.
Riverside Terrace
Cincinnati
Hamilton, OH
09/29/09
45233
73
1975
$1,743,750
$23,887
Cinti West
rental market continued Greater Cincinnati Year-End Historical Rent & Occupancy $680 94.1%
$666 92.7%
$675 $666
In light of minimal new supply being delivered in 2010, CB Richard Ellis forecasts an effective rent increase of 1.0% in the coming year as the local economy finds a footing and moves to recovery. The outlook for 2011 and 2012 appears even brighter as market fundamentals tighten further.
$648 $641
$631
$637 $626 $627
$611
91.5% 90.9%
The Northeast corridor experienced a drop in both occupancy and rents in the later half of last year. Rents and occupancies held steady through June but then rental activity diminished and concessions began to emerge. Quoted rents remained fairly constant but more than half of the properties in the Northeast corridor instituted pricing specials averaging onemonth free.
90.6%
89.5% 89.6% 89.7%
89.1%
88.4% 87.6% 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 Source: CB Richard Ellis
A significant number of better quality class A and B assets in good locations reported increased occupancies and rising rents. These properties have been the beneficiaries of the slowdown in home-buying in the region. On the other end of the spectrum, class C quality or worse assets struggled to find qualified renters. More than 20 properties in the region in operational or financial distress reported physical occupancies below 70%. Furthermore, several owners reported an increase in delinquencies and bad debt charge-offs due to the softened economy. In the second half of 2009, the East submarket reported an increase in average rents from $0.74 per SF to $0.77 per SF while at the same time vacancy climbed from 7.2% to 9.2%. Closer examination of the results showed dramatic increases in rents in newer assets with in-fill locations, while suburban rents noticeably declined.
investment market The investment market in Greater Cincinnati in 2009 saw a mere $84 million in sales, its lowest levels of trading activity since 1991. This is a 72% decline from the 2005 peak and a 70% decrease from the prior year. Lack of available financing for purchasers and a widening “bid-ask” spread between sellers and buyers were the two primary reasons. The roots of the slowdown began in the summer of 2008 and carried forward through 2009. In 2008, more than $200 million in sales occurred in the first half, slowing to $65 million in the second half. Very little inventory was brought to market in 2009 and the majority of trades occurred at levels below $10.0 million. Most 2009 sales had some flavor of distress. The Connor Group acquired two assets from the same lender in Northern Kentucky, the 301-unit Trellises and the 192-unit Columns on Wetherington. Miller Valentine acquired the Falls at Settlers Walk, 105 units in Springboro, after it fell into receivership. These transactions accounted for almost half of the total sale volume in the market. With so few transactions occurring, capitalization rates became difficult to quantify. Furthermore, because the few transactions clearing the market had some flavor of distress, they were
investment market (continued)
not meaningful in determining appropriate cap rates. By general consensus, cap rates were understood to have risen from historic lows, but investors, lenders and appraisers struggled to accurately quantify current rates. In the latter half of 2009 and early 2010, investor demand in the Midwest clearly indicated cap rates holding steady and in some cases decreasing based on bidding activity for Class A deals. Class B rates increased slightly and appeared to be ranging from 8.00% to 8.50%. Class C deals evidenced a wide spread from 9.50 to 11.00%, depending on condition and location. Sale activity is expected to increase in 2010 as lenders seek to resolve problem situations and more distressed deals are brought to market. We are not likely to experience trading volumes approaching Cincinnati’s long term average of $180 million, but $100 million in trades seems attainable. Most sellers will be lenders clearing balance sheets along with private investors facing maturities. Buy-side activity will be dominated by local and regional private players drawn to Cincinnati’s improving fundamentals and historically steady yields.
per year; and the five-year window from 2009 through 2013 indicates a further decrease to an average of only 600 units per year. In addition, multi-family housing supply will further tighten due to removals from inventory. The region has been removing or abandoning an average of more than 200 units of obsolete inventory in each of the past three years. This removal trend is likely to continue as more than 40,000 units in the region are in excess of 40 years old. Many of these older assets are good candidates for reinvestment but some will be too costly to resurrect. Development activity in the Cincinnati market will be led by purpose-built, student housing. Xavier University is underway with the construction of 550 new on-campus beds at Xavier Commons. Also, several new projects are slated to begin in Clifton adjoining the University of Cincinnati, including The Friars Club at McMillan Street and Ohio Avenue. The Friars Club will be the home to more than 200 new beds in a LEED-certified building developed by North American Properties with occupancy expected for the 2011-12 school year. Overall housing supply in the region is expected to continue tightening after single-family permits were down to 3,100 in 2009 from a highwater mark of more than 11,000 in 2005.
development pipeline The Greater Cincinnati multi-family development pipeline is very thin at the present time and is expected to remain relatively quiet for the next several years. According to the Census Bureau, only 327 multi-family permits were issued in 2009 in the Cincinnati SMSA. Tracking five-year increments reveals an interesting trend: From 1999 through 2003, Greater Cincinnati averaged more than 2,000 new apartment units per year; from 2004 through 2008, delivery volumes decreased by half to an average of 1,000 units
For more information, please contact:
CB Richard Ellis INDIANAPOLIS|CINCINNATI MULTI-HOUSING GROUP Dave Lockard First Vice President 513.369.1347 [email protected]
Steve LaMotte, Jr., CCIM Senior Vice President 317.269.1018 [email protected]
Amy Burmeister, CCIM Senior Associate 317.269.1166 [email protected]
Scott Oyler Senior Associate 513.369.1352 [email protected]
Dane Wilson Associate 317.269.1057 [email protected]
David Englert Financial Analyst 317.269.1034 [email protected]
Emily Cantley Sales Assistant 513.369.1328 [email protected]
Kelly Henderson Client Services Specialist 317.269.1064 [email protected]
Or visit our web site at: www.cbre.com/mhgic
201 East Fifth Street • Suite 1200 • Cincinnati, OH 45202 • T 513.369.1300 101 W. Washington Street • Suite 1000 • Indianapolis, IN 46204 • T 317.269.1000
