Last night I had the chance to attend a quarterly real estate presentation hosted by Perkins & Co., a local accounting firm. The topic was Multi-family housing development featuring Clyde Holland with Holland Partner Group. First off I have to say that Clyde Holland is a very engaging and authentic speaker. He gave a presentation of number based facts that didn’t bore anyone in the room for over an hour. I would say that the room was filled with mostly real estate developers, both large and small. One of the most interesting ideas that Clyde presented is that the millennial generation (people born between 1980 and 2004 approximately) will on average do things 5 years later than their parents did. I can say that I am right on track to be 5 years behind my parents on the whole shebang, marriage, children and most notably home ownership. I bought my home in 2014 when I was 30 years old while my parents were quite a few years younger.
Looking to more numbers, Clyde noted that the highest rent growth in Portland was in 2015. Normally there is a trend of rental rate increases during the year from January through to October. The last quarter of the year there is normally a reduction in rental rates as less people are moving and vacancies are not likely to change much. Something very notable happened in Portland rental rates in 2014 and 2015, there was not a reduction in rates in the last quarter of either year. The demand was so strong that rates did not need to change. We looked at research that showed a strong correlation between wage growth and rent growth. Then we looked to tech wage growth. In some of the strongest tech cities, Portland, Seattle, Denver and San Francisco the wage growth far surpassed the rent growth. Tech workers are able to pay a lot more in rent and multi-family developers are spending a lot of money to market to them. Clyde stated that in his opinion 2015 to 2020 will have the strongest rent growth in history in Portland and the west coast. He did share his idea that there will be a decline right after the Presidential election in November and an opportunity for better purchasing power for those looking to buy multi-family housing.
Holland Partner group is looking actively around Portland for new areas primed for multi-family development. They are concentrating on new transit stops where there is opportunity to create energy and density. Holland is behind the hugely successful Orenco Station development in Hillsboro. They have found that the number one amenity renters are looking for is social interaction. The developments they work on focus on high density, community gathering areas and retail.
How does this relate to home purchases in Portland? There are a number of ways the rental and multi-family markets effect home purchases. If you aren’t a tech worker or a higher wage earner saving can be an issue when your rental rates are so high and continue to climb. This limits savings for down payments and may make building or repairing credit difficult. There is also a shortage of inventory for single family homes in Portland. Multi-family developers are purchasing detached homes on normal sized lots and building rental buildings with up to 70 units. This practice uses up lots that may have had single family homes built on and lowers single family home inventory. The catch 22 is that there is a shortage of both single family homes and mulit-family homes in Portland right now. During the recession building all but stopped in both arenas. This has left a huge shortage and builders have not been able to catch up to the demand. At the end of the evening Clyde left us with a quote that I think is spot on and our local government needs to take note, “Unless you have adequate housing you won’t have affordable housing.”