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Category : Central Oregon Multifamily News

Home/Market Research/Archive by Category "Central Oregon Multifamily News"
Fall 2020 MF Blog

Multifamily Building Boom: Are we keeping up with demand

by Lauren Evanson 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.

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Summer 2020 MF Blog

COVID-19 and the Central Oregon Multifamily Market

by Compass Commercialon 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.

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Spring 2020 MF

CO MULTIFAMILY NEWS: Investing Lessons

by Compass Commercialon 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.

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Central Oregon Multifamily News

Plan in Advance for Selling

by Compass Commercialon 6 March 2019in Central Oregon Multifamily News

The following content is taken directly from the Central Oregon Multifamily News, Winter 2019 issue.

Topping the headlines in Central Oregon multifamily news is statewide rent control, and it does appear this measure will be passed. As usual, small businesses, like most Central Oregon rental property owners, must find a way to operate in the face of government headwinds. It seems like a better legislative approach would be to find ways to increase the supply of rental housing by encouraging and incentivizing housing providers, not targeting and obstructing them.

The good news is that the market continues to do well, driven by strong in-migration. A significant amount of new supply coming online in recent years has caused vacancy rates to inch up and rent increases to slow dramatically. Both are healthy developments as the free market continues to be most effective for regulating supply and demand and ultimately rental rates.

 

 

THINKING OF SELLING?
We strongly recommend proactively preparing your property in advance of going on the market. Surprises kill deals! They also reduce net sales proceeds and cause unnecessary pressure and stress.

Prior to putting your property on the market:

  1. Tour all units. You could be very surprised at what some of your tenants may be up to. There is an old adage that applies here “you get what you inspect, not what you expect.”
  2. Have your trusted contractor go through the units with you including the attic and crawlspace. Take care of deferred maintenance. Doing this proactively on your own timeline is cost effective, as opposed to operating under the pressure of deal timelines, appraisers, inspectors, and lenders.

This should not only apply when getting a property ready to sell but should also be considered on at least an annual basis. If you want to really get a gold star when putting your property on the market, consider having a complete building inspection done prior to hitting the market.

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

To receive the email or mailer, contact Ron at 541-322-1230 | rross@compasscommercial.com or Terry 541-848-4060 | toneil@compasscommercial.com.

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

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Central Oregon Multifamily News

Multifamily News: Vacancy Rate Stabilizes

by Compass Commercialon 23 October 2018in Central Oregon Multifamily News

The following content is taken directly from the Central Oregon Multifamily News, Fall 2018 issue.

New apartment construction is making headway in the region-wide housing shortage and affordability problems.

The market is healthy and working.

There is more housing availability, and rent growth has slowed dramatically from the recent years of double digit increases.
New apartment construction in Bend has been modest but steady. Some West Coast markets, have seen an oversupply of new construction, driving up vacancies with long periods of lease up times for new buildings. Rent growth has declined in a few markets. So far, Bend has not experienced that, as new construction has been somewhat restrained by high costs, shortage of land, and regulatory burdens and costs.

Sales activity is modest. Buyer demand remains strong but is tempered by higher
interest rates and price resistance. Many owners are still reluctant to sell, largely due to tax considerations.

It is still a great seller’s market. We are always happy to provide free Broker Opinion of Values for your multifamily properties. We are well-versed in 1031 exchanging and can answer many of your questions regarding the 1031 exchange. We also provide consulting on preparing properties for sale. Ideally, this process should begin well before actually putting a property on the market.
Contact us early if you are thinking of selling!

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

To receive the email or mailer, contact Ron at 541-322-1230 | rross@compasscommercial.com or Terry 541-848-4060 | toneil@compasscommercial.com.

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

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Central Oregon Multifamily News

Multifamily News: Interest rates and cap rates

by Compass Commercialon 10 May 2018in Central Oregon Multifamily News

The following content is taken directly from the Central Oregon Multifamily News, Spring 2018 issue.

Many have prematurely predicted rising interest rates for the last several years. It does appear that rising rates are finally a reality. The question now is “how far and how fast?”

Rising rates could hamper performance and returns for investment real estate. Cap rates will go up as financing costs rise. When investors can get a better return on “risk off” investments, like US treasuries, they will demand a higher return on investments like real estate. The answer to the “how far and how fast” question is critical to how rising rates will impact multifamily real estate values going forward.

A moderate and measured rise could have little negative impact. However, it will put further pressure on the bottom line. There is legitimate concern about how much further rents can rise locally, after the explosive increases over the last few years. The twin trends of rising rates and plateauing rents pose significant headwinds to valuation increases. A sharp and prolonged rate increase would be more significant perhaps resulting in some backing up on values.

“The twin trends of rising rates and plateauing rents pose significant headwinds to valuation increases.”

The above chart illustrates apartment sales metrics for the last two years including cap rates. It is likely that we witnessed the low water mark for Bend cap rates in 2017 with the rates in the mid 4’s.

Interest rates and cap rates

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

To receive the email or mailer, contact Ron at 541-322-1230 | rross@compasscommercial.com or Terry 541-848-4060 | toneil@compasscommercial.com.

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

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Apartment Vacancy Rates - Multifamily Outlook

Multifamily Outlook: Learning from national trends

by Compass Commercialon 20 December 2017in Central Oregon Multifamily News

Recently, Ron Ross, CCIM was published in the Cascade Business News for an article on what we can learn locally in Central Oregon about the multifamily industry from national trends. Below is an excerpt of the article as published by CBN. Read the full article as published in the CBN here.

“Real estate markets are no doubt independently local in nature. Central Oregon seems to be as wildly independent as anywhere in the country. As a sub-tertiary market, we have always been more volatile both on the way up and the way down. In the good times, we command surprisingly low cap rates driven by limited supply and strong investor demand. During the most recent recession we crashed harder than most places, but recovered strongly and rapidly.

However, we should still observe and learn from national trends. We are not an island, nor are we immune from national market forces. It has long been observed that Central Oregon has a strong correlation with both California and Portland markets, and to a lesser degree, Seattle.

In the November/December issue of the Commercial Investment Real Estate magazine from the CCIM Institute an insightful article by Beth Mattson-Teig entitled Sailing Ahead: Will the renter pool keep up with the robust development pipeline? points out the following national trends:

1. Continuing strong, but slowing demand for apartment rentals.
2. Record levels of new construction.
3. …”

Read the full article as published in the CBN here.

*Graphic reprinted with permissions from Commercial Investment Real Estate, the magazine of the CCIM Institute, November 1, 2017, Vol. XXXVI, No. 6.
Learn more at www.ccim.com/cire-magazine
If you wish to read the article referenced in Ron’s article from Commercial Investment Real Estate in full, click here.

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Multifamily Logo

Multifamily News: Vacancies up, rent growth slowing

by Compass Commercialon 30 November 2017in Central Oregon Multifamily News

The following content is taken directly from the Central Oregon Multifamily News, Fall 2017 issue.

The Central Oregon multifamily market continues to be a healthy landlord market. It is still a great time to own residential rental properties.

Data collection is challenging in our market. In past years a local appraiser surveyed the market and was the statistical market expert for many years. They have long since ceased doing those surveys. In more recent years the Central Oregon Rental Owners Association surveyed its members and released a report annually. However, it seemed to generate controversy as critics disputed their data and accused them of being self-serving, thus they ceased surveying and reporting.

Currently, the best source of this data is CoStar, a very expensive subscription service. Compass Commercial is one of the few member organizations in Central Oregon. CoStar data is showing a Bend vacancy rate of approximately 3.9% and Redmond at approximately 5%. Those rates are up from the reported 1-2% vacancies during the last several years.

They are reporting modest rent increases during the last year of about 3% in Redmond and 4% in Bend. This is a substantial slowdown from the double-digit increases experienced over the last few years.

What does this mean for multifamily property owners? The market is reaching a plateau. Rent increases have outpaced incomes substantially, so continued upward pressure is not sustainable. An increasing supply of new construction is slowly impacting the vacancy rate and absorption has been slowing. All in all, a normal and healthy market cycle. And still is a great time to sell, as there is limited inventory for sale and strong buyer demand.

 

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

To receive the email or mailer, contact Ron at 541-322-1230 / rross@compasscommercial.com or Terry 541-848-4060 / toneil@compasscommercial.com.

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

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