How will the downtown apartment market shake out?

[GRDadof3]

On 5/26/2016 at 1:51 PM, GR_Urbanist said:

Well, no. That's not remotely what I'm saying.

It's getting a better understanding from these people of what they are looking for in candidates, and not emotionally attributing nefarious ends to innocent folks in hopes of shaming them into hiring certain people. What person would want to get a job that way?

Sometimes it's just a matter that not enough women or minorities simply arent interested, just like most men don't become nurses, and most women don't want to work in sanitation. You cant force it if it isnt there.

Back when I was in High School, and learning how to apply for jobs, it was called doing legwork and networking. Showing enthusiasm and heightened interest in the potential employer and regularly communicating with them so you get noticed more.

If some want to call these people racist and sexist, and demand a quota system because their staff numbers don't adhere to census data (Sadly that's the only route these things ultimately end up on), that's the best way to drive them out of Grand Rapids. No one wants to be fingered as being a bad person because outside parties dont like the makeup of their staff that was the result of nothing they have proven to have done wrong.

 

 

I'm not talking about jobs. What are you talking about?

[GR_Urbanist]

On 5/26/2016 at 2:13 PM, GRDadof3 said:

I'm not talking about jobs. What are you talking about?

The original discussion is based on the WoodTV link where DGRI (who seems way to obsessed with counting skin colors) says the following:

" There are some areas of downtown that DGRI sees the opportunity for improvement on — like the makeup of who is working downtown. Of the more than 45,000 downtown workers, 90 percent of them are white compared with seven percent black and two percent Asian."

Floyd_Z pointed out his reservations with  "Equality-driven hiring plans"  which is just sadly another form of quota hiring (no other way to ever guarantee it works). I agree with that. I also am not comfortable with skin color being introduced as a factor. I rather not get a job that way.

It's fine that DGRI wants more skin diversity, even though that isnt what I consider diversity, I just hope they avoid demonetization, insinuation, and intimidation to get it but rather by building interested people up (regardless of background) so that they walk in and land the job because they are the best of the best.

[GRJohn]

I wonder if DGRI means to attract minority owned businesses.  I'd like to see a more diverse offering of products and services. I have a personal food quota that I try to filll by making sure I try every kind of ethic food there is.  

I'm not sure what kind of power DGRI has other than outreach and education regarding helping minorities feel welcome in downtown.  I've always dreamed of a little italy or chinatown or little mexico neighborhood in GR.  I'm not sure downtown would ever get something like that but maybe the surrounding neighborhoods.    

[wmrharris]

i would suggest that the presence of highly skilled minorities, and especially African-Americans in our community is a sign of the city moving up into a more serious metroplitan region. Right now, we have a serious brain drain of young, college educated minorities (especially blacks). Atlanta, Chicago, heck even Detroit all offer better, more conducive environments in which to start a career, find a mate and lead. This flight in turn skews economic statistics in the area to make this "one of the worst for blacks" (that noxious trope from Forbes).

Moreover, a region that cannot sustain or be hospitable to minorities loses an economic edge in its ability to attract top tier companies.

So, yes, the face of the community in terms of its boards is one of the ways the region maintains its economic attractiveness.

 

 

[GRDadof3]

1 hour ago, wmrharris said:

i would suggest that the presence of highly skilled minorities, and especially African-Americans in our community is a sign of the city moving up into a more serious metroplitan region. Right now, we have a serious brain drain of young, college educated minorities (especially blacks). Atlanta, Chicago, heck even Detroit all offer better, more conducive environments in which to start a career, find a mate and lead. This flight in turn skews economic statistics in the area to make this "one of the worst for blacks" (that noxious trope from Forbes).

Moreover, a region that cannot sustain or be hospitable to minorities loses an economic edge in its ability to attract top tier companies.

So, yes, the face of the community in terms of its boards is one of the ways the region maintains its economic attractiveness.

 

 

 

Exactly, where decisions are made and by whom determines programming, investments, priorities and other things that make it more attractive to minorities. Many times I feel that it's nobody's "fault" that they don't think about what minorities would like in their city, it's just they live in an environment of mostly mono-cultural tastes. When decisions are made regarding Movies in the Park, is consideration made for the very large Hispanic community that is a short drive away from downtown? If there's no one Hispanic on the movie committee, I'm going to guess not. So no one is at fault and the committee is not racist per se, but it still means that the very large Hispanic community near downtown is forgotton about. 

I use that as an example. Large companies pay attention to these things, and they also pay attention to the companies that they do business with. If one of the local law firms is courting a division of Microsoft, and the project team at Microsoft comes to visit the law firm and finds all male lawyers and all the women doing administrative work, how does that look? Or not one person of color in the office? The Microsoft people are coming from Seattle, where whites are becoming the minority. It will undoubtedly be a culture shock, and they may instead pick a firm from Chicago or another city. 

How "qualified" the law firm is is only one of MANY reasons of who they choose to work with. 

But despite all the talk of talent attraction, having a more diverse set of voices at the table makes for a better city. The work that ArtPrize has done to increase diversity in its business model is an example to look at. It's made for a much better experience for more people of color. 

[MJLO]

http://www.mlive.com/realestate-news/2016/07/apartment_construction_booms_i.html#incart_river_home

I'm wondering if Mlive is mixing projects.  They list several projects that have "pulled building permits".  Included in that are several of the bigger projects from the last 18 months.  They include the 42 story Hinman tower in this list.  Would Hinman have already pulled a building permit for this tower?  Am I misunderstanding what it means to pull a building permit?  To me that would signal construction is imminent but it may just be one of the many checkmarks in a sea of things that allow something to maybe get built.

[GRDadof3]

16 hours ago, MJLO said:

http://www.mlive.com/realestate-news/2016/07/apartment_construction_booms_i.html#incart_river_home

I'm wondering if Mlive is mixing projects.  They list several projects that have "pulled building permits".  Included in that are several of the bigger projects from the last 18 months.  They include the 42 story Hinman tower in this list.  Would Hinman have already pulled a building permit for this tower?  Am I misunderstanding what it means to pull a building permit?  To me that would signal construction is imminent but it may just be one of the many checkmarks in a sea of things that allow something to maybe get built.

He has this statement:

The latest permits do not include several large projects that are still on the drawing boards and would add another 1,200 apartments to the market. They include:

 

..between the list of projects that have pulled permits and those that haven't yet. You don't pull permits until you're ready to go.

[GRDadof3]

The Press says there are permits pulled for 1256 new apartments in Grand Rapids, 1969 total for Kent County. 

http://www.mlive.com/business/west-michigan/index.ssf/2016/10/apartment_projects_lead_growth.html

I was way low on my count a week or so ago (in the Lyon/Ottawa discussion):

Morton (100), 616 on Michigan (54), 616 at Alabama (100), 616 at 820 Monroe (85), Arena Place (100), Orion's project in Eastown (not downtown but similar buyers I would assume) (34), Fulton Place West of GVSU (112), 555/601 Michigan (10), Rowe (77), what else? 

That's nearly 650 units that have come on the market in the last year or so, just market rate. 

Coming very soon will be the projects in Belknap (88 + 75), Fulton Square (50), Barley Flats (36) and Venue Tower (88). Coming after that will be LMD and Seward, Grand & Benson, half of 20 Fulton East, and the Proos site (those that are under construction already).

[Pattmost20]

Rise development adding just shy of 300 units.

[GRDadof3]

12 hours ago, Pattmost20 said:

Rise development adding just shy of 300 units.

Right, I had it listed as Grand & Benson.

 

 

[Pattmost20]

2 minutes ago, GRDadof3 said:

Right, I had it listed as Grand & Benson.

 

 

That's what I get for skimming. 

[GRDadof3]

6 minutes ago, Pattmost20 said:

That's what I get for skimming. 

No worries, it was being referred to as RISE on the Planning Commission agenda and I was like "What the heck is RISE?"  Thought it was a new church being built. 

There was already a discussion going on about the downtown apartment boom so I merged them (couldn't find it previously). 

 

[GRDadof3]

Here's a guy who moved from Chicago to a near downtown apartment and likes it so much he wrote an article about it:

http://www.nextavenue.org/benefits-downshifting-smaller-city/

[GRDadof3]

In this article about the Rowe out today, it says that 52 of the 77 apartments are rented:

http://realestate.mlive.com/realestate-news/2016/10/the_rowe_celebrates_its_new_be.html

and 9 of the 11 condos are sold. Since Sam Cumming's condo is for sale at the Fitzgerald, I wonder if he picked up one of these? 

[x99]

And yet, the disaster at The Morton continues, with more than 25 units vacant or soon to be.  See https://michiganhousinglocator.rentlinx.com/55-Ionia-Ave-Nw-Grand-Rapids-MI-49503-2.  This includes units of basically every size.  I'm going to go out on a limb here and wonder aloud again whether the difference is attached parking, and ample available nearby parking.  Morton has no parking, and the ramps are full (unless you get one of those in at 5PM out by 6 or 7AM packages).

Looking at another project, Waters Center, which I also mentioned a couple weeks ago, things are also less than stellar for their $1600 to $2000/mo 2 bedroom units.  https://michiganhousinglocator.rentlinx.com/55-Ionia-Ave-Nw-Grand-Rapids-MI-49503-2.  And they have ample attached parking.  But, to be fair, these units have a terrible layout where part of the apartment is up a small set of stairs.  So perhaps that isn't as good an indicator.

Rowe is doing okay so far.  So, I still tend to think that trying to sell or rent units without parking is a bad idea. I cannot identify any other good reason for what I think it is somewhat fair at this point to describe as the failure of the Morton project.  The downtown apartment market might continue to do well for awhile, but I think these people building micro units and units with insufficient parking are in for the same rude awakening that Rockford has been getting.  If you're a bank, how to do you deal with it when some guy wants money to build a bunch of tiny, $1000 a month studios with no parking, while a downtown project in a supposedly tight market has at least three or four of those same darn apartments that they apparently cannot lease?  If banks are watching the Morton, I have to believe funding for that sort of thing is going to dry up real fast. 

Where I see this going is to 800 square foot apartments, single bedroom, with parking, at $1200 to $1500 a month, and maybe $1600 a month for a two bedroom, with parking..  Unless there is some other reason I am missing that Morton is such a flop?  I hate calling it that, but 25% vacancy (which does not seem to be getting better) is a disaster.

EDIT:  Are all the apartments at Rowe finished and open for leasing?  If so, a 30%+ vacancy rate still isn't exactly great for a brand new building, given 1200 new units being built.  It will be interesting to see where it lands in a year.  The saturation point lies somewhere, and I have to think that when it gets reached, it's going to just kill the non-downtown projects lease rates.  Man, do I hope I'm wrong.  

[Chester Cheeto]

4 minutes ago, x99 said:

And yet, the disaster at The Morton continues, with more than 25 units vacant or soon to be.  See https://michiganhousinglocator.rentlinx.com/55-Ionia-Ave-Nw-Grand-Rapids-MI-49503-2.  This includes units of basically every size.  I'm going to go out on a limb here and wonder aloud again whether the difference is attached parking, and ample available nearby parking.  Morton has no parking, and the ramps are full (unless you get one of those in at 5PM out by 6 or 7AM packages).

The owner of The Morton needs to sweet talk Ellis into putting a ramp on their surface lot at Division/Library like a year ago.  Granted it's not ideal in the fact that their parking situation would be a block walk across Ionia and Divison, but that seems to be about the only place close enough to meet the demand for the residents of The Morton.  Also, if the Keeler building and 82 Ionia end up getting rehabbed with some ground floor retail, this area of Division could become quite a little retail hub, put some ground floor retail spots in the parking ramp as well.  A ramp could solve parking demands for The Morton, Keeler, 82 Ionia, and go a long way to help revitalize that rather dead section of Division.  And just to make things sweeter for the folks on the City Commission, propose a Silver Line stop there so people park once and have a free bus shuttle around downtown.  Oh, and plenty of bike racks as well.

[x99]

2 minutes ago, mielsonwheels said:

Morton.  Also, if the Keeler building and 82 Ionia end up getting rehabbed with some ground floor retail, this area of Division could become quite a little retail hub, put some ground floor retail spots in the parking ramp as well.  A ramp could solve parking demands for The Morton, Keeler, 82 Ionia, and go a long way to help revitalize that rather dead section of Division.  And just to make things sweeter for the folks on the City Commission, propose a Silver Line stop there so people park once and have a free bus shuttle around downtown.  Oh, and plenty of bike racks as well.

There was a WZZM article about parking today interviewing another downtown business owned who bailed out because of it.  The new parking guy seems to be saying that any public ramps are years out, minimum.  In my book, Morton is a bellwether.  You need parking, or you're DOA. 

[MJLO]

1 hour ago, x99 said:

There was a WZZM article about parking today interviewing another downtown business owned who bailed out because of it.  The new parking guy seems to be saying that any public ramps are years out, minimum.  In my book, Morton is a bellwether.  You need parking, or you're DOA. 

Am I incorrect in my impression that the Morton was a partnership with RDV?  Might explain why they are keeping their rates where they are without responding to market conditions.  More of a holdings scenario over an income property.  The Waters being mixed use is still more utilized now compared to before it's renovation, would that give the developers breathing room on filling those vacancies? 

You talk about these vacancies, but no one here seems to be in the know as to what the expectation is as to where occupancy rates should be upon completion.  Perhaps we have a skewed perception on what that should be, because in 2011 616 would open up one of their properties to an 18 month waiting list.  Is it the expectation based on developer and financing business models that these properties open to 100% occupancy?   There must be some anticipation for market absorption of these units as they come online.  I don't think hundreds of millions of dollars are being spent in new construction simply from a speculative report alone.  The people coordinating these things can't be that naïve.  There has to be a level of income-to investment expectation wrapped up in them. 

I get where you're going with parking, properties with available parking are going faster than over priced, no parking options.  There's been a noticeable slowing in office growth, and abandonment of new projects because of lack of parking.  I don't see how there's an easy answer to that.  The city has to take some safeguards against having a core that's almost entirely parking structures 20 years from now, but the area obviously isn't to the point where people would confidently want to live car free either.  It's like a circular chicken/egg issue with no good answer.

[EastownLeo]

Site Acquisition Costs + Construction Costs = Total Expected Development Cost
X Loan to Value Ratio
= Permanent Mortgage

X Annualized Mortgage Constant
= Cash Required for Debt Service
X Lender Required Debt Service Coverage Ratio
= Required Net Operating Income or NOI
+ Estimated Operating Expenses (Not passed through to tenants) = Required Effective Gross Income
÷ Expected Occupancy Rate
= Required Gross Revenue
÷ Leasable Square Feet
= Rent Required Per Square Foot

Question: Is this average required rent per square foot achievable? 

 

Im sure they are running the numbers.

[x99]

44 minutes ago, MJLO said:

as they come online.  I don't think hundreds of millions of dollars are being spent in new construction simply from a speculative report alone.  The people coordinating these things can't be that naïve.  There has to be a level of income-to investment expectation wrapped up in them. 

You wouldn't think so, but a lot of very experienced investors (on a national level) are starting to get extremely nervous about the multifamily market.  Rates of return have been driven down into the dirt compared to historical norms.  This leaves even less room for error.  And this is happening on a national level.  The best, succinct description I've seen of the current multifamily market is "Buy high and sell higher".  If that isn't the definition of a speculative market, I don't know what is.  We're at a point now where you can rent in downtown Chicago for the same or less money.  And the Chicago rent often comes with a parking space.  I'm sorry, but that is not a bet I would be making.

 

[GRDadof3]

17 minutes ago, x99 said:

You wouldn't think so, but a lot of very experienced investors (on a national level) are starting to get extremely nervous about the multifamily market.  Rates of return have been driven down into the dirt compared to historical norms.  This leaves even less room for error.  And this is happening on a national level.  The best, succinct description I've seen of the current multifamily market is "Buy high and sell higher".  If that isn't the definition of a speculative market, I don't know what is.  We're at a point now where you can rent in downtown Chicago for the same or less money.  And the Chicago rent often comes with a parking space.  I'm sorry, but that is not a bet I would be making.

 

The funding requirements for condos need to be loosened up, in my opinion. There's way more incentive to do apartments.

Then there's this article today:

http://www.mlive.com/business/west-michigan/index.ssf/2016/10/renters_struggle_to_find_housi.html

The "missing middle" discussion again. 

4 hours ago, x99 said:

There was a WZZM article about parking today interviewing another downtown business owned who bailed out because of it.  The new parking guy seems to be saying that any public ramps are years out, minimum.  In my book, Morton is a bellwether.  You need parking, or you're DOA. 

I did notice the other day that the apartment leasing office isn't on the ground floor anymore. And a pet store that was in one of those spaces looks closed now. 

[x99]

53 minutes ago, GRDadof3 said:

The funding requirements for condos need to be loosened up, in my opinion. There's way more incentive to do apartments.

Then there's this article today:

http://www.mlive.com/business/west-michigan/index.ssf/2016/10/renters_struggle_to_find_housi.html

The "missing middle" discussion again. 

Yup.  And they are right.  And you know what the problem is?  One of the comments has it (partly) right:  The City's housing inspection program does impose substantial costs, and a lot of them are ridiculous.  I know people who tried to rent out their own houses and had to spend thousands on completely stupid nonsense, like replacing or repairing every single window so it would open and stay open on its own.  It's not cheap.  

Number two big issue, and an even bigger problem?  The zoning code which absolutely prohibits new apartments in existing houses, even if the neighborhood is already filled with them.  Figure out that little gem of housing discrimination.  Oh, and just asking for a variance if you want to take a stab at it?  $2,000.  Yeah.  I was thinking about getting one for something one and just about had a heart attach.  I would almost bet money that this is one of the highest variance costs in any major city in the entire Midwest, if not the entire country.  So expanding the housing stock in any sort of affordable way is pretty much impossible.  Thanks, City!  

The city and its crazy policies are really at the root of a lot of the affordability problem for the "missing middle".  Not that the city would ever admit that.  It's all those evil demon landlords ripping people off...  

[MJLO]

2 hours ago, x99 said:

The city and its crazy policies are really at the root of a lot of the affordability problem for the "missing middle".  Not that the city would ever admit that.  It's all those evil demon landlords ripping people off...  

Lol, perhaps they will use some of that variance money to subsidize rents to acommodate people in the middle

[GRDadof3]

In Boulder Colorado they've had an "Affordable Housing Program" since 2000, that requires every major residential development have 20% of their units be "affordable" according to the city's program requirements. Unlike the MSHDA program here in Michigan that sets the income requirements, or Section 8 that is dictated by the Federal government, Boulder set their own benchmarks:

"Affordable" means that a resident would not have to spend more than 30 percent of his or her income on housing. Rents and prices on affordable units are designed to meet a variety of income levels, depending on the type of housing project and the funding sources.

If the developer cannot make the financing work on the project with that much affordable housing in the project, they make a payment to the city in lieu of meeting the requirement. That money then goes toward other city initiatives for affordable housing. 

According to this article, between 2009 - 2014, 24 major residential projects were built and 13 of those decided to pay the city instead of provide on-site affordable housing. The city had collected $19 Million at the time of this article in 2014.

http://www.dailycamera.com/news/boulder/ci_27130292/boulder-is-affordable-housing-working

It's a really interesting concept, and the article takes a deep dive into both sides of the issue. I've heard about this program for quite a while now and I have heard critics say that it has driven up prices overall in Boulder, for the non-affordable units, because the developers have to make up the costs on the market rate units to offset the affordable ones. I think the desirability of Boulder and land use regulations in Boulder, however, have more to do with their shocking housing prices (like Ann Arbor).

I've been to Boulder twice there really is no place like it they've I've ever seen, and I can understand why so many people want to live there (and go to school there at UC - Boulder).  That, to me, is why housing is so expensive there.

So could a program like this work in GR? Does GR need a program like this? It only applies to new developments, not existing housing (no rent controls are allowed per Colorado law apparently). 

[Allison Slater]

23 hours ago, mielsonwheels said:

The owner of The Morton needs to sweet talk Ellis into putting a ramp on their surface lot at Division/Library like a year ago.  Granted it's not ideal in the fact that their parking situation would be a block walk across Ionia and Divison, but that seems to be about the only place close enough to meet the demand for the residents of The Morton.  Also, if the Keeler building and 82 Ionia end up getting rehabbed with some ground floor retail, this area of Division could become quite a little retail hub, put some ground floor retail spots in the parking ramp as well.  A ramp could solve parking demands for The Morton, Keeler, 82 Ionia, and go a long way to help revitalize that rather dead section of Division.  And just to make things sweeter for the folks on the City Commission, propose a Silver Line stop there so people park once and have a free bus shuttle around downtown.  Oh, and plenty of bike racks as well.

Would be interesting to see that parking lot between Morton and that Ellis lot developed into a tall building with that walkway between Morton and Keeler preserved as an arcade with a row of shops facing it, much like the arcade that used to run between what is now Flannagan's and that Ellis ramp.  Or like Nickel's Arcade in Ann Arbor.