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Winter 2021 MF Blog

A Closer Look at Multifamily Financing

by on 19 January 2021in Central Oregon Multifamily News

This issue highlights a major distinguishing characteristic for 2-4-unit properties versus larger complexes.

Properties up to 4 units qualify for conventional 30-year (or 15-year) fixed-rate loans. These loans are straightforward and reasonably easy to get done. They are most often backed by Fannie Mae and Freddie Mac and are essentially the same type of mortgages as those on a personal residence. The loan pricing is slightly higher for investors. Qualification standards and loan-to-value (LTV) ratios have some variations, but nonetheless, they are extremely attractive mortgages. At today’s interest rates right around 3%, a leveraged acquisition can generate a nice cash flow.

For properties greater than 4 units, the financing market is a different world. There are many providers for this type of commercial financing, and the process and loan terms can vary significantly from lender to lender and property to property. In general, these loans do not exceed a 10-year term and interest rates tend to be variable rather than fixed. This creates interest rate and financing risk, especially when the loan becomes due in 10 years. Interest rates for these types of mortgages are still very attractive in today’s environment.

In 2020, COVID created some havoc in this market, and these loans became much more difficult. Lenders perceived higher risk and, in some cases, stopped making loans altogether. LTV ratios were reduced significantly requiring more equity, and onerous reserve requirements were put in place. The expectation is that this market will return to more normalcy as COVID tends to resolve in 2021.

30-year fixed-rate conventional investor financing was 2.875% to 3.25% as of January 4, 2021. 75% maximum LTV. (Source: Tim Maher, Cascade Mortgage)

The Compass Commercial Multifamily Brokerage Team specializes in Central Oregon multifamily properties of all sizes and types from duplexes to 200+ units. We track sales, rental statistics, vacancy rates and more in the multifamily sector.

To find out about new multifamily listings, sign up for new listing alerts by going to: compasscommercial.com/mfnews.

Fall 2020 MF Blog

Multifamily Building Boom: Are we keeping up with demand

by on 10 November 2020in Central Oregon Multifamily News

Written by Ron Ross, CCIM

The talk of the multifamily community these days is the apartment building boom. Central Oregon has experienced a housing shortage for the last several years. The city of Bend is encouraging more multifamily housing. Historically, roughly 60% of all residential units constructed in Bend are single-family and 40% are multifamily. Public officials want to reverse this trend, with a strong focus on increasing density to allow for more multifamily units.

One concern of owners and developers is the potential for over supply leading to vacancies and downward pressure on rental rates. So far this has not been the case. Absorption remains strong with new units being leased as soon as they become available. There are few concessions being offered in the market and rent growth continues modestly.

According to a 2018 HUD study, the Bend-Redmond MSA would require about 600 new multifamily units per year from 2018 through 2021. The COVID-19 pandemic has created an even greater demand for housing due to the increased number of people moving from urban areas, aggravating the housing shortage. It seems likely that the 600 new units per year will not be enough to meet demand.

How many multifamily units are being built?

In the city of Bend, 482 new multifamily units have come online in the last two years. There are currently 813 units under construction which totals 1,295 units, an average of 431 units per year between 2019-2021. There are 1486 units in the pipeline, which could be delivered in the next 2-3 years. Not all the pipeline projects will be built.

Redmond has seen explosive growth in the multifamily space with several hundred units being planned but so far, the City of Redmond has only issued permits for 127 multifamily units in 2020. Even though there are several larger projects in the planning process in Redmond, it is unlikely they will be able to deliver product before 2022.

Some of the most notable recent deliveries in Bend include the 203 premium units at The Hixon at Westside, 120 units at the Reserve at Brookswood and 67 Units at The Nest. Currently under construction are 240 affordable housing units at Stillwater Crossing in South Bend, 141 units at 171 SW Shevlin Hixon Drive and 130 units at Outpost 44 on Boyd Acres Rd. In Redmond 144 Units at Triple Ridge is near completion and 90 units at Ridgeview Heights were recently delivered and fully leased.

What does this all mean?

The housing crunch will likely remain as demand will still exceed supply, assuming the population influx continues. While there have been substantial rent decreases in high cost West Coast cities, that has not been the case in Central Oregon. So long as people keep moving in, multifamily construction will be in high demand. The real threat facing multifamily development over the next decade in Central Oregon is the lack of high-density land supply available for development. While any market can experience short term spikes in vacancies due to a large number of unit deliverables in a given year, the lack of development land and increasing product demand will keep multifamily vacancies low for years to come.

If selling your multifamily property is on your horizon, now is a great time to call us at 541.322.1230 or 541.848.4060.

To find out about new multifamily listings, sign up for new listing alerts by going to: compasscommercial.com/mfnews.

Compass Points Q3 2020

Compass Points Q3 2020 Market Report

by on 21 October 2020in Compass Points Market Report

Compass Points Q2 2020Growth and New Construction in Central Oregon:

The 2020 COVID-19 crisis caused businesses to pivot how they are operating. Those who were hit the hardest have been unable to keep their doors open. However, the Central Oregon commercial market is remaining strong with new construction popping up all over the area. What is causing this influx in demand for commercial properties? Find out in the Q3 Market Report.

Bend’s Office Market:

Compass Commercial surveyed 218 office buildings for the third quarter 2020 Bend report. The buildings in the sample totaled 2,731,655 square feet (SF). Negative net absorption of 20,557 SF was recorded during the quarter, and the vacancy rate rose to 7.50%, up from 5.48% in Q2 2020. There is now 204,963 SF available for lease, up from 145,601 SF in Q2. Get the full report for a complete breakdown of the Bend office market.

Bend’s Retail Market:

Compass Commercial surveyed 260 retail buildings totaling nearly 4,523,652 square feet (SF) for the third quarter of 2020. The citywide vacancy rate rose slightly, from 3.09% at the end of Q2 2020 to 3.38% at the end of Q3. There is currently 152,798 SF of retail space available citywide, up from 139,843 SF in Q2. Get the full report for a complete breakdown of the Bend retail market.

Bend and Redmond Industrial Markets:

Compass Commercial surveyed 320 industrial buildings for the third quarter 2020 report, totaling 4,612,306 square feet (SF). The industrial market gained a healthy 53,008 SF of net positive absorption in Q3, and the vacancy rate dropped from 3.80% in Q2 to 3.47% in Q3 2020. Four new buildings were added to the survey in Q3 and there is now 159,856 SF of industrial space available for lease in Bend, compared to 170,716 SF in Q2.

The Redmond Industrial market experienced 23,063 square feet (SF) of negative net absorption in the third quarter of 2020 with two new leases and five new vacancies noted. The vacancy rate rose to 3.50%, up from 2.10% in Q2. Out of Redmond’s industrial sector of 1,654,385 SF total leasable space, there is now 58,447 SF available for lease. There are 87 buildings in the Redmond industrial market that were surveyed.

To view the complete report, sign up to receive our quarterly publication at https://www.compasscommercial.com/POINTS or call (541) 383-2444.

Compass Points is a quarterly publication of Compass Commercial Real Estate Services offering comprehensive surveys of the Central Oregon commercial real estate market. The report provides a detailed look at quarterly vacancy and absorption data in office, retail and industrial product types throughout Bend’s primary submarkets, as well as the Redmond industrial market. Absorption data contained in the report pulls from samples of buildings over 3,000 sq. ft.

Compass Points Q2 2020

Compass Points Q2 2020 Market Report

by on 22 July 2020in Compass Points Market Report

Compass Points Q2 2020The Effects of COVID-19 on Commercial Real Estate:

It comes as no surprise COVID-19 has made an impact on the world. The last five months have changed dramatically for tenants and landlords alike. Brokers Howard Friedman, CCIM, Ron Ross, CCIM and Graham Dent, Partner take a look at how each market has been affected and what has stayed the same. Plus, get a sneak peek into the multifamily market.

Bend’s Office Market:

Compass Commercial surveyed 212 office buildings for the second quarter 2020 Bend report. The buildings in the sample totaled 2,658,027 square feet (SF). A negative net absorption of 29,175 SF was recorded during the quarter with a vacancy rate of 5.48%, up from 4.11% in Q1 2020. There is now 145,601 SF available for lease, up from 108,367 SF in Q1. Get the full report for a complete breakdown of the Bend office market.

Bend’s Retail Market:

Compass Commercial surveyed 259 retail buildings totaling nearly 4,519,289 square feet (SF) for the second quarter of 2020. The citywide vacancy rate rose slightly, from 3.01% at the end of Q1 2020 to 3.09% at the end of Q2. There is currently 139,843 SF of retail space available citywide, up from 135,866 SF in Q1. Get the full report for a complete breakdown of the Bend retail market.

Bend and Redmond Industrial Markets:

Compass Commercial surveyed 316 industrial buildings for the second quarter 2020 report, totaling 4,493,791 square feet (SF). The industrial market lost 12,277 SF of net negative absorption in Q2, and the vacancy rate rose from 3.27% in Q1 to 3.80% in Q2 2020. There is now 170,716 SF of industrial space available for lease in Bend, compared to 146,439 SF in Q1.

The Redmond Industrial market gained 10,225 square feet (SF) of positive net absorption in the second quarter of 2020 for a fourth straight gain in quarterly occupancy, with three new leases noted. The vacancy rate rose slightly however, from 1.7% to 2.1%, due to an additional 17,206 SF building on NE 11th Street being added to the survey. Out of Redmond’s industrial sector of 1,654,385 SF total leasable space, there is now just 35,384 SF available for lease.

To view the complete report, sign up to receive our quarterly publication at https://www.compasscommercial.com/POINTS or call (541) 383-2444.

Compass Points is a quarterly publication of Compass Commercial Real Estate Services offering comprehensive surveys of the Central Oregon commercial real estate market. The report provides a detailed look at quarterly vacancy and absorption data in office, retail and industrial product types throughout Bend’s primary submarkets, as well as the Redmond industrial market. Absorption data contained in the report pulls from samples of buildings over 3,000 sq. ft.

Summer 2020 MF Blog

COVID-19 and the Central Oregon Multifamily Market

by on 9 July 2020in Central Oregon Multifamily News

By Ron Ross, CCIM

The world has changed dramatically in the last four months. No one anticipated or planned for the COVID-19 pandemic.

We are asked on a regular basis how this has impacted the local real estate market and, more specifically, the local multifamily real estate market. There are no shortages of opinions on the subject. Our inboxes fill with webinars, newsletters, news flashes, and other thoughts of how this crisis is impacting various markets. The opinions are diverse and changing as the situation continues to develop.

So far, measurable impacts are minimal, but we are early in the game. So here is some perspective.

Leading up to March of 2020, the local multifamily market was vigorous and healthy. Vacancy rates for the last few years were running between two and four percent. Rents had steadily increased, but the rates of increase had leveled off more recently. New construction was robust, but not seeming to cause oversupply, as new deliveries were readily absorbed. Buyer demand was extremely high, with very few owners willing to sell. Property valuations had risen steadily and consistently. The dark clouds were rent control and other government interventions.

From a real estate perspective, we are very early in assessing the impacts of COVID-19. With real estate trends being more long-term, markets could be impacted for months or even years to come. But what has changed so far?

  • There is uncertainty about the tenant’s ability to pay rent. It appears the nonpayment of rent is only elevated slightly from pre-COVID-19. When government stimulus programs run out, this may become more of an issue.
  • Tours and inspections of occupied units pose a challenge during transactions. Buyers ability to inspect may be somewhat compromised.
  • There is great concern about increased government intervention.

What has not changed?

  • Vacancy rates are holding steady.
  • New construction is continuing, at least as it applies to those projects already in the pipeline.
  • Investor demand continues to be strong.
  • Sellers are still in short supply.

The longer-term impacts are still very uncertain. It would seem there may be some softening in both valuations and rental rates. Thus far, there is no evidence of that.

Will the COVID-19 recession result in increasing vacancy and delinquency rates and a corresponding softening of rental rates? Will we see a market pricing correction? There is still strong investor demand. Multifamily continues to be a favored asset class. If for sale inventory continues to be scarce, then this correction may not happen. Please let us know what you are experiencing and or expecting.

As always, if we can be of any assistance with buying or selling multifamily properties, or just being a source of information for you, please do not hesitate to contact Ron Ross, CCIM or Terry O’Neil, CCIM.

If selling your multifamily property is on your horizon, now is a great time to call us at 541.322.1230 or 541.848.4060.

To find out about new multifamily listings, sign up for new listing alerts by going to: compasscommercial.com/mfnews.

Compass Points Q1 2020

Compass Points Q1 2020 Market Report

by on 21 April 2020in Compass Points Market Report

Compass Points Q1 2020Tenants, Landlords & COVID-19:

Covid-19 took the world by complete surprise. Partner and Broker Dan Kemp, CCIM breaks down the effects the virus has on businesses, landlords and tenants in Central Oregon and what you can do to help.

Bend’s Office Market:

Compass Commercial brokers surveyed 210 buildings for the first quarter 2020 office report. The buildings in the sample totaled just over 2.636 million square feet (SF). Positive net absorption of 3,738 was recorded during the quarter, but the vacancy rate rose slightly, due to the addition of another office building to the survey, moving from 4.02% in Q4 ’2019 to 4.11% in Q1 ‘20. There is now 108,367 SF available for lease, up from 105,218 SF in Q4.

Bend’s Retail Market:

Compass Commercial surveyed 257 retail buildings totaling over 4.5 million square feet (SF) for the first quarter of 2020. The citywide vacancy rate rose slightly, after three quarters of gain, from 2.9% at the end of Q4 ‘19 to 3.01% at the end of Q1 ’20. There is currently 135,866 SF of retail space available city-wide, up from 130,743 SF in Q4.

Bend and Redmond Industrial Markets:

Compass Commercial surveyed 315 buildings for the first quarter 2020 industrial report, totaling 4,479,864 square feet (SF). The industrial market took a big hit in the quarter, losing 77,176 SF of net negative absorption in Q1, and the vacancy rate rose from 1.55% in Q4 to 3.27% in Q1, the first time the vacancy rate has been above 3% since Q4 of 2017. There is now 146,439 SF of industrial space available for lease in Bend, compared to 69,263 SF in Q4.

The Redmond industrial market gained 2,000 square feet (SF) of positive net absorption in the first quarter of 2020 for a third straight gain in quarterly occupancy, with just one new lease noted. The vacancy rate fell as a result, from 1.9% to just 1.7%. Out of Redmond’s industrial sector of 1,637,179 SF total leasable space, there is now just 28,403 SF available for lease.

To view the complete report, sign up to receive our quarterly publication at https://www.compasscommercial.com/POINTS or call (541) 383-2444.

Compass Points® is a quarterly publication of Compass Commercial Real Estate Services offering comprehensive surveys of the Central Oregon commercial real estate market. The report provides a detailed look at quarterly vacancy and absorption data in office, retail and industrial product types throughout Bend’s primary submarkets, as well as the Redmond industrial market. Absorption data contained in the report pulls from samples of buildings over 3,000 sq. ft.

Spring 2020 MF

CO MULTIFAMILY NEWS: Investing Lessons

by on 27 February 2020in Central Oregon Multifamily News

By Ron Ross, CCIM

As you likely know, Warren Buffett, the CEO of Berkshire Hathaway, made his considerable fortune investing in the stock market. Mr. Buffett has also done well investing in real estate and many of his stock market principals carry over to real estate investing.

So what did Mr. Buffett learn from his real estate investments?

  1. Buy when most are selling and sell when most are buying. Mr. Buffett once said, “I will tell you how to become wealthy. Be fearful when others are greedy. Be greedy when others are fearful.” Restated, buy when most are selling and sell when most are buying.
  2. Don’t concern yourself about daily valuations. Warren Buffett bought properties at bargain prices and knew that over time, they would make good investments. “Games are won by players who focus on the playing field,” he quipped, “not by those whose eyes are glued to the scoreboard.” As he likes to say, “our favorite holding period is forever.”
  3. Property management is often undervalued and underappreciated. You don’t need to be a real estate expert to achieve satisfactory returns, but you do need to turn over management to someone who is well qualified to manage the property for you.

Thanks to Doug Marshall for contributing these Warren Buffett nuggets. Doug Marshall is the award-winning author of Mastering the Art of Commercial Real Estate Investing, and a multifamily mortgage broker with Marshall Commercial Funding. If you need advice on multifamily financing, Doug can be reached at 503-614-1808 or check out his website at marshallcf.com.

The Central Oregon multifamily market remains robust. Vacancy rates are steady and 2019 had modest rent growth.

Very few owners are selling and there is heavy buyer demand. Is this a market being driven by fear or greed?

If selling your multifamily property is on your horizon, now is a great time to call us at 541.322.1230 or 541.848.4060.

The Central Oregon Multifamily News is published by brokers Ron Ross, CCIM and Terry O’Neil, CCIM.

To find out about new multifamily listings, sign up for new listing alerts by going to: compasscommercial.com/mfnews.

Click here to view the full PDF Newsletter.

Compass Points Q4 2019

Compass Points® Q4 2019 Market Report

by on 20 January 2020in Compass Points Market Report

Compass Points Q3 20192019 Summary / 2020 Forecast:

In this issue’s cover article, principal broker and partner Howard Friedman, CCIM reviews the year in commercial real estate and makes predictions for 2020.

Bend’s Office Market:

Compass Commercial surveyed 209 buildings for the fourth quarter 2019 office report. The buildings in the sample totaled just over 2.61 million square feet. Positive net absorption of 11,005 sq. ft. was recorded during the quarter, but the vacancy rate rose slightly, due to the addition of a large office building to the survey, moving from 3.93% in Q3 to 4.02% in Q4.

Bend’s Retail Market:

Compass Commercial surveyed 256 retail buildings totaling 4.5 million square feet for the fourth quarter of 2019. The citywide vacancy rate fell once again for the third quarter in a row, from 3.3% at the end of Q3 2019 to 2.94% at the end of the year.

Bend and Redmond Industrial Markets:

Compass Commercial surveyed 315 buildings for the fourth quarter 2019 industrial report, totaling 4,477,864 square feet. The industrial market gained 791 sq. ft. of net positive absorption in Q4, and the vacancy rate fell slightly from 1.58% in Q3 to 1.55% in Q4. There is now 69,263 sq. ft. of industrial space available for lease in Bend, compared to 70,054 sq. ft. in Q3.

The Redmond Industrial market gained 31,123 square feet of positive net absorption in the fourth quarter of 2019 for a second straight gain in occupancy. The vacancy rate fell as a result, from 3.8% to just 1.9%. Out of Redmond’s industrial sector of 1,637,179 sq. ft. total leasable space, there is now just 30,403 sq. ft. available for lease.

To view the complete report, sign up to receive our quarterly publication at https://www.compasscommercial.com/POINTS or call (541) 383-2444.

Compass Points® is a quarterly publication of Compass Commercial Real Estate Services offering comprehensive surveys of the Central Oregon commercial real estate market. The report provides a detailed look at quarterly vacancy and absorption data in office, retail and industrial product types throughout Bend’s primary submarkets, as well as the Redmond industrial market. Absorption data contained in the report pulls from samples of buildings over 3,000 sq. ft.

Compass Points Q3 2019

Compass Points® Q3 2019 Market Survey

by on 28 October 2019in Compass Points Market Report

Compass Points Q3 2019A Look Into Our Economic Future:

In this issue’s cover article, principal broker and partner Howard Friedman, CCIM discusses the economic future and how it affects the real estate industry.

Bend’s Office Market:

Compass Commercial surveyed 208 buildings for the third quarter 2019 office report. The buildings in the sample totaled just over 2.6 million square feet. Negative net absorption of 23,431 sq. ft. was recorded during the quarter moving the vacancy rate up to 3.9% from 2.98% in Q2. There is now 102,360 sq. ft. available for lease, up from 77,257 sq. ft. in Q2.

Bend’s Retail Market:

Compass Commercial surveyed 256 retail buildings totaling 4,503,899 square feet for the third quarter of 2019. The citywide vacancy rate fell dramatically from 5.39% at the end of Q2 2019 to 3.30% at the end of Q3. This was primarily due to a significant lease signed during the quarter in the north97 submarket.

Bend and Redmond Industrial Markets:

In Bend, we surveyed 314 buildings for the third quarter 2019 industrial report, totaling 4,427,296 square feet. The industrial market gained 34,051 sq. ft. of positive absorption in Q3, and the vacancy rate fell from 2.71% in A2 to just 1.58%. There is now 70,054 sq. ft. of industrial space available in Bend, compared to 119,105 sq. ft. in Q2.

In Redmond, the market gained back some of the losses incurred in the second quarter, with 14,500 sq. ft. of positive net absorption recorded in the third quarter of 2019. The vacancy rate fell from 4.6% to 3.8%. Redmond’s industrial sector now has 1,637,179 sq. ft. of total leasable space, now including owner occupied buildings and buildings under 3,000 sq. ft.

To view the complete report, sign up to receive our quarterly publication at https://www.compasscommercial.com/POINTS or call (541) 383-2444.

Compass Points® is a quarterly publication of Compass Commercial Real Estate Services offering comprehensive surveys of the Central Oregon commercial real estate market. The report provides a detailed look at quarterly vacancy and absorption data in office, retail and industrial product types throughout Bend’s primary submarkets, as well as the Redmond industrial market. Absorption data contained in the report pulls from samples of buildings over 3,000 sq. ft.

Compass Points Q2 2019

Compass Points® Q2 2019 Market Survey

by on 25 July 2019in Compass Points Market Report

Compass Points Q2 2019A Primer on Restaurant Buying:

In this issue’s cover article principal broker and former restaurateur Howard Friedman shares tips on what it takes to purchase and operate a successful restaurant.

Bend’s Office Market:

Compass Commercial surveyed 207 buildings for the second quarter 2019 office report. The buildings in the sample totaled just under 2.6 million square feet. Negative net absorption of 2,396 sq. ft. was recorded during the quarter. Despite the negative absorption, the vacancy rate moved down to 2.98% from 3.03% in Q1, due to an additional building added to the survey. There is now 77,257 sq. ft. available for lease, down from 77,902 sq. ft. in Q1.

Bend’s Retail Market:

Compass Commercial surveyed 255 retail buildings totaling 4,492,794 square feet for the second quarter of 2019. The citywide vacancy rate rose significantly, from 2.84% at the end of Q1 2019 to 5.39% at the end of Q2. However, the majority of the vacancy was the direct result of the Shopko on Bend’s north end vacating its 106,216 sq. ft. store in April, due to bankruptcy of the company. In fact, removing that data point, the overall city wide vacancy rate would be just 3.0%, with only a 9,084 sq. ft. negative net number, rather than the 115,300 sq. ft. loss officially reported.

Bend and Redmond Industrial Markets:

In Bend we surveyed 313 buildings for the second quarter 2019 industrial report, totaling 4,392,452 square feet. The industrial market gained 30,018 sq. ft. of net absorption in Q2, and although the vacancy rate rose from 2.37% in Q1 to 2.71% presently, the change was due to two buildings being added to the survey. There is now 119,105 sq. ft. of industrial space available in Bend, compared to 103,104 sq. ft. in Q1.

In Redmond there was dramatic negative absorption in the second quarter, with the vacancy rate rising from 1.4% to 4.6%, due to 42,356 sq. ft. of negative net leasing and the addition of new buildings to the market. Redmond’s industrial sector now has 1,637,179 sq. ft. of total leasable space, not including owner occupied buildings and buildings under 3,000 sq. ft., with 76,026 sq. ft. available for lease in the 86 building industrial market.

To view the complete report, sign up to receive our quarterly publication at https://www.compasscommercial.com/POINTS or call (541) 383-2444.

Compass Points® is a quarterly publication of Compass Commercial Real Estate Services offering comprehensive surveys of the Central Oregon commercial real estate market. The report provides a detailed look at quarterly vacancy and absorption data in office, retail and industrial product types throughout Bend’s primary submarkets, as well as the Redmond industrial market. Absorption data contained in the report pulls from samples of buildings over 3,000 sq. ft.