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How will the downtown apartment market shake out?

GRDadof3

By GRDadof3
in Grand Rapids

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mgreven Hamlet

mgreven

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3 hours ago, lighthousedave said:

It's on my calendar

Well, if you guys really hang out for a long time I can join you after 8:30pm when my rehearsal is done...that's a lot of discussion about 12 story buildings and architecture so maybe I'll have to come if there another time.

However, knowing this board maybe you'll still be there...  =)

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Morris Unincorporated Area

Morris

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1 hour ago, GRDadof3 said:

A good rundown of the downtown apartment market:

https://mibiz.com/item/24325-grand-rapids-apartment-developers-balance-demand,-cost-as-2017-looms

 

Interesting article about which units are getting rented, parking, the amount of units getting built, and the possible discounting of prices of the new rentals....and from the bankers that have the purse strings!

It's all up to the financiers, to see how long this building boom will last.  

 

 

 

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x99 Burg

x99

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On 12/29/2016 at 10:56 AM, Morris said:

Interesting article about which units are getting rented, parking, the amount of units getting built, and the possible discounting of prices of the new rentals....and from the bankers that have the purse strings!

It's all up to the financiers, to see how long this building boom will last.  

The part I found most interesting is the "its no longer a cart before the horse situation" quote.  I don't know the context he said it, but in the context the city biggywiggys usually use it, it still rings hollow.  We're talking a few thousand units in a city that already had two hundred thousand people.  In terms of attracting retailing and other amenities that are required to sustain growth and rental rates, we have solved nothing.  You might support a few restaurants and bars with that, but you still won't support even a medium-size grocer or any other retailer without adequate parking facilities.  I think the proposed theater and the so-far DOA Morton retail space basically proves the proposition.  Residential at Morton did nothing for the retail they wanted, and at the 616 retail, residential and parking ramp project, the retail residential component will be scaled back.  Despite thousands of residential units, we really haven't moved the retail need or the transit needle at all.  

Worse, the price points are becoming increasingly unattractive because that needle has not moved.  If the promise of retailing is not fulfilled, I strongly question whether rents can be sustained.  $1500 for 750 square feet is a mountain of money for not much space.  That's Chicago money--real city money.  But at least the space is livable and new, I suppose.  Microunit projects, on the other hand, I think will find themselves completely up s--- creek without a paddle.  People might fall for that for awhile, but not for long.  A grand a month to live in something the size of a large office without a parking space in a town with no retail and not that much to do, and about 200 to 800 feet from older apartments that are three times the size that rent for the same or less money with a better parking situation?  Socially conscious doesn't trump financially stupid forever.

As far as the downtown sweetspot, $1800 is a mortgage, taxes, insurance, maintenance, and car payment on a modest but very nice house and car in the suburbs. So I still think this apartment boom is at the end of the line unless the city comes to the plate in a big way to facilitate a major retail development.  Ironically, if you tossed out the police and put back the City Center mall and its parking ramp, we might be in a better residential development position right now.  616 Development seems to recognize this with their mega-proposal.  Here's hoping the city will, too.  I just don't think we've managed to thread the needle yet, despite the investment into the SilverLine and bike sharing studies and whatnot.  Unless, you know, that promised massive investment along the SilverLine route happens.  :rofl:

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MJLO City

MJLO

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2 hours ago, x99 said:

 I just don't think we've managed to thread the needle yet, despite the investment into the SilverLine and bike sharing studies and whatnot.  Unless, you know, that promised massive investment along the SilverLine route happens.  :rofl:

I wonder if the lack of investment along the Silver line has in part to do with all of the missions, and the swarming presence of homeless keeping potential investors out.  As if they thought drop in "rapid transit" and it will be come an investment hot spot.  But they didn't factor that most people would still avoid the area.  That Division corridor has the infrastructure to be the coolest retail/residential/office neighborhood in the city.  

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GRDadof3 Ecumenopolis

GRDadof3

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2 hours ago, x99 said:

The part I found most interesting is the "its no longer a cart before the horse situation" quote.  I don't know the context he said it, but in the context the city biggywiggys usually use it, it still rings hollow.  We're talking a few thousand units in a city that already had two hundred thousand people.  In terms of attracting retailing and other amenities that are required to sustain growth and rental rates, we have solved nothing.  You might support a few restaurants and bars with that, but you still won't support even a medium-size grocer or any other retailer without adequate parking facilities.  I think the proposed theater and the so-far DOA Morton retail space basically proves the proposition.  Residential at Morton did nothing for the retail they wanted, and at the 616 retail and parking ramp project, the retail component will be scaled back.  Despite thousands of residential units, we really haven't moved the retail need or the transit needle at all.  

Worse, the price points are becoming increasingly unattractive because that needle has not moved.  If the promise of retailing is not fulfilled, I strongly question whether rents can be sustained.  $1500 for 750 square feet is a mountain of money for not much space.  That's Chicago money--real city money.  But at least the space is livable and new, I suppose.  Microunit projects, on the other hand, I think will find themselves completely up s--- creek without a paddle.  People might fall for that for awhile, but not for long.  A grand a month to live in something the size of a large office without a parking space in a town with no retail and not that much to do, and about 200 to 800 feet from older apartments that are three times the size that rent for the same or less money with a better parking situation?  Socially conscious doesn't trump financially stupid forever.

As far as the downtown sweetspot, $1800 is a mortgage, taxes, insurance, maintenance, and car payment on a modest but very nice house and car in the suburbs. So I still think this apartment boom is at the end of the line unless the city comes to the plate in a big way to facilitate a major retail development.  Ironically, if you tossed out the police and put back the City Center mall and its parking ramp, we might be in a better residential development position right now.  616 Development seems to recognize this with their mega-proposal.  Here's hoping the city will, too.  I just don't think we've managed to thread the needle yet, despite the investment into the SilverLine and bike sharing studies and whatnot.  Unless, you know, that promised massive investment along the SilverLine route happens.  :rofl:

I think with the current pipeline of apartment projects, there's about 3 years of absorption needed to get them to near full occupancy. But as someone said to me who's making HUGE investments in apartments downtown recently, "We're in it for the long run." He said they're looking at the 20 year plan, and planning accordingly (financially).

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GRLaker Hamlet

GRLaker

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15 hours ago, MJLO said:

I wonder if the lack of investment along the Silver line has in part to do with all of the missions, and the swarming presence of homeless keeping potential investors out.  As if they thought drop in "rapid transit" and it will be come an investment hot spot.  But they didn't factor that most people would still avoid the area.  That Division corridor has the infrastructure to be the coolest retail/residential/office neighborhood in the city.  

I have zero doubt that this is the case. Loads of potential, but the missions and homeless population are going nowhere. If you can afford $1,800 per month in rent, you're not interested in homeless people setting up shop around your car in the lot or being hit up for cash every time you set foot out of your door. Investment will continue to take place around Division, while the corridor itself remains an investment deadzone. 

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organsnyder Hamlet

organsnyder

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14 hours ago, MJLO said:

I wonder if the lack of investment along the Silver line has in part to do with all of the missions, and the swarming presence of homeless keeping potential investors out.  As if they thought drop in "rapid transit" and it will be come an investment hot spot.  But they didn't factor that most people would still avoid the area.  That Division corridor has the infrastructure to be the coolest retail/residential/office neighborhood in the city.  

While I don't disagree that the activity around the homeless shelters is stifling growth in the area, I don't see Heartside as benefiting much from the Silver Line (which doesn't even go past the homeless shelters—it jogs over to Jefferson at Wealthy). The biggest potential is further south down the corridor.

In Burton Heights, we are seeing investment—a few storefronts have seen major renovations, and some new businesses have popped up. Last I heard, LINC is still planning a major housing development at 100 Burton, and it wouldn't surprise me if we hear an official announcement from Rockford Construction regarding their (already leaked) plans for the Cottage Grove & Madison area.

Paradoxically, I think that investment is being slowed because of the promise of development. There are quite a few underutilized properties that are being held by tightfisted investors—including Azzar—holding out for higher returns. I think that everyone is waiting for their neighbor to invest in their property, so that property values rise. There is a perverse incentive that rewards delaying investment.

Also, keep in mind that the Silver Line has only been operating for two years.

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GRDadof3 Ecumenopolis

GRDadof3

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51 minutes ago, organsnyder said:

While I don't disagree that the activity around the homeless shelters is stifling growth in the area, I don't see Heartside as benefiting much from the Silver Line (which doesn't even go past the homeless shelters—it jogs over to Jefferson at Wealthy). The biggest potential is further south down the corridor.

In Burton Heights, we are seeing investment—a few storefronts have seen major renovations, and some new businesses have popped up. Last I heard, LINC is still planning a major housing development at 100 Burton, and it wouldn't surprise me if we hear an official announcement from Rockford Construction regarding their (already leaked) plans for the Cottage Grove & Madison area.

Paradoxically, I think that investment is being slowed because of the promise of development. There are quite a few underutilized properties that are being held by tightfisted investors—including Azzar—holding out for higher returns. I think that everyone is waiting for their neighbor to invest in their property, so that property values rise. There is a perverse incentive that rewards delaying investment.

Also, keep in mind that the Silver Line has only been operating for two years.

One of the engineers who worked on the master plan for the 60th/Division end of the Silver Line asked me what I thought about the possibility of developments there. I said "Ehhhhh, not sure." There's certainly probably a market for more apartments in that area, but I'd be surprised if anyone who can afford $2/sf would want to live at 60th and Division, no matter how fancy the buses are. Maybe an LIHTC project.

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organsnyder Hamlet

organsnyder

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18 minutes ago, GRDadof3 said:

One of the engineers who worked on the master plan for the 60th/Division end of the Silver Line asked me what I thought about the possibility of developments there. I said "Ehhhhh, not sure." There's certainly probably a market for more apartments in that area, but I'd be surprised if anyone who can afford $2/sf would want to live at 60th and Division, no matter how fancy the buses are. Maybe an LIHTC project.

Yeah, I agree with your assessment of 60th and Division. Though, anecdotally, we've seen home prices in our Garfield Park neighborhood jump 20-40% over the past few years, and the nicer houses are certainly drawing those sorts of demographics. Not sure how much of that can be attributed to the SL, though.

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GRDadof3 Ecumenopolis

GRDadof3

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37 minutes ago, organsnyder said:

Yeah, I agree with your assessment of 60th and Division. Though, anecdotally, we've seen home prices in our Garfield Park neighborhood jump 20-40% over the past few years, and the nicer houses are certainly drawing those sorts of demographics. Not sure how much of that can be attributed to the SL, though.

Garfield Park has the potential to continue to improve, vs 60th and Division. Of all the suburban areas in Grand Rapids, that area always seems to be a declining one. I think it's because the ratio of industrial properties to residential ones is too high to make for a nice residential area. It reminds me of Sterling Heights and other older suburbs of Detroit, which are terrible looking because of lack of good planning/zoning when they started growing. 

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ModSquad Hamlet

ModSquad

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3 hours ago, GRDadof3 said:

One of the engineers who worked on the master plan for the 60th/Division end of the Silver Line asked me what I thought about the possibility of developments there. I said "Ehhhhh, not sure." There's certainly probably a market for more apartments in that area, but I'd be surprised if anyone who can afford $2/sf would want to live at 60th and Division, no matter how fancy the buses are. Maybe an LIHTC project.

Let me jump in here on a couple of issues brought up:

  • The Rockford Development that is slated for the Cottage Grove/Boston Square neighborhood will not involve housing in the Garfield Park Neighborhood.  Predominately what is going to happen in Cottage Grove/Madison/Jefferson is new business start ups that are job creators for the neighborhood along with job training support organizations.
  • The Garfield Park Neighborhood from a residential aspect is blowing up!  I was doing my weekly assessment of the market on GRAR and could not believe a house at 400 Hoyt is listed for $238K...wow!  
  • The Garfield Park Neighborhood from the perspective of larger development potential is also there.  LINC has a good shot at having their Burton Street project funded in this round.  If not this round, most certainly the April Round.  On top of that I believe we are going to see major redevelopment happen in the Burton Heights Business District (Burton/Division).  I also think that Division between 28th and Burton from the South heading North also has potential.
  • Based on the way MSHDA has the LIHTC program currently structured there is virtually no way a LIHTC deal could get funded for anywhere on Division South of 28th Street. So unless they change their QAP, it wont happen.  That being said, I still think there is some potential for some apartment development far south on Division.  There is a rather large group of local leaders meeting regularly to develop some ideas and incentives to get some larger scale housing development in that area.
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GRLaker Hamlet

GRLaker

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I think the Division and 60th area would have potential if it wasn't for the 800,000 mobile homes. The southern Kentwood/Cutlerville area is absolutely littered with trailer parks and it absolutely drives down the value of the area. There are also a lot of commercial lots and empty lots that really make that stretch look more Detroit-like than Grand Rapids. Get all of that cleaned up and it could potentially be a more desirable place to invest.

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arcturus Burg

arcturus

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On 12/29/2016 at 3:55 PM, MJLO said:

I wonder if the lack of investment along the Silver line has in part to do with all of the missions, and the swarming presence of homeless keeping potential investors out.  As if they thought drop in "rapid transit" and it will be come an investment hot spot.

Propaganda Doughnuts approves this message. 

http://www.mlive.com/news/grand-rapids/index.ssf/2016/07/doughnut_shop_cites_homeless_a.html

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