Multi-Family Housing Outlook

Alan Margolin of M&M Lighting in Houston explains what the market is looking for in his area.

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In the past few months alone, San Francisco, New York City, and Seattle are just some of the major cities that reported unprecedented growth. In the San Francisco and San Jose area, a resurgence in the tech industry is drawing talent to the area and causing rents to rise by a whopping 12 percent.  According to an article in the San Francisco Examiner, potential renters often have to compete in bidding wars.

On top of the high demand, Janan New, executive director of the San Francisco Apartment Association, told Examiner staff writer Sarah Gantz, “Current renters moving in are pickier about what they want. They are willing to pay high rents, but don’t want to compromise on amenities.” To that end, New told Gantz that landlords have had to step up, installing granite countertops, track lighting, and other new features that can drive up asking rates.

This summer, Crain’s New York reported that for the past several months, the one-two punch of high demand and scarce inventory has sent Manhattan’s average monthly rents to an all-time high. Recently, the vacancy rate in New York City dipped below the one percent mark.

Real estate experts say that the difficulty consumers are experiencing in securing loans for a home purchase is partly responsible for the sharp rise in rentals nationwide.

However, there are exceptions. One area where both new construction and multi-family housing are strong is Texas. “Multi-family has been our specialty for years,” comments Alan Margolin, owner of M & M Lighting in Houston. “We had a cycle in late 2009-10 where everything dropped off and the backlog [in inventory] disappeared. At that time, apartment conditions were stagnant in Texas.”

That didn’t last long. “Apartments began filling back up, starting with the A grade units and so forth,” he comments. In general, it takes about one to two years to plan an apartment building, Margolin estimates, adding that this is a factor in why demand is up, along with the rents in Houston, Austin, Dallas, and San Antonio.

Margolin has also noticed two types of multi-housing developers. The first wants a deluxe LEED-certified building that is completely state-of-the art. The other type is interested in energy savings and the reduction in maintenance costs over the time they own the property. In both scenarios, the building owners and operators are interested in LED. “We’ve performed energy studies for some of our multi-housing clients,” Margolin states, adding, “Everyone is researching LED sconces for the hallway, for example.”

This is not to say that conversion to LED has been swift. Margolin says the majority of multi-housing companies are using Energy Star-rated GU24-based CFLs. “It is still the dominant [light source], but some are testing out LED products,” he remarks. Widespread acceptance of LED has been slowed by the initial cost versus the timeline for payback along with another reason unique to Texas. “We’re at the lowest prices for kilowatt hours plus natural gas is cheap,” Margolin comments.

M & M Lighting’s business has been increasing over the past two years. There are many types of lighting that is needed for multi-family properties, such as illuminating parking lots, garages, stairway lighting, and hallways.  “We’ve been growing incrementally each month,” Margolin notes.





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