The Columbus Apartment Association kicked of 2023 with the first General Meeting of the year on Thursday, March 16 at The Peak at Edison featuring the annual industry forecast from Rob Vogt of VSI Strategic Insights. CAA Executive Director Laura Swanson welcomed members and recognized the Past Presidents and Hall of Fame members in attendance before recognizing the winners of the CAA Bowling for Charity Luncheon. The top overall score went to Trent Eyman of Chadwell Supply while the top team also went to the team from Chadwell Supply. Next, Noelle Smith Chair of the CAA Bus Tour Workgroup took a few moments to encourage members to submit properties for consideration as a stop on this year’s tour before introducing Vogt. Vogt began with a recap of the 2022 multifamily housing trends starting by saying that rents increased dramatically at 9.2% in 2022 compared to less than 4.7% the previous year. He did acknowledge that these increases have been driving headlines locally. While rents have increased vacancy rates remained roughly the same year over year. Vogt reminded the audience that as an analyst he would like to see vacancy rates near 5% to allow for normal tenant turnover and have enough housing choices available. The low vacancy rates have created low turnover. “We continue to have a very constricted market. Turnover remains low. The fact is we don’t have places for tenants to move to, so they stay in place,” Vogt said. “We’re seeing a well-stocked pipeline. We’ve got a lot of units in the pipeline right now but what we experience is we tend not to see all of these units built.” The lowest vacancy rates are being seen in older, more affordable properties while the highest rates are being seen in recently built properties. With vacancy rates so low, Vogt noted that it’s no surprise that double digit rent increases are being seen at the older properties. “Despite the 9.2% average rent increase in Central Ohio, we’re actually well behind what other areas of the Midwest and the United States are doing. We still have some room to grow in terms of rent growth,” Vogt said. “We have a pretty healthy rental market.” Moving forward into 2023 projections, the forecast indicates that rent growth will slow a bit dropping around 3-4% rent increases. Coming as no surprise there are almost 5,600 units planned for the downtown/University market. Vogt noted that only a fraction of those units will come to fruition. Coming in second is the Grove City market with over 4,800 units proposed, largely affordable units. Vacancy rates are projected to increase slightly due to the amount of product in the pipeline by 2024 up to 6% which would still make it a healthy multifamily market. “There’s been a lot of talk in newspapers about the demand for housing in Central Ohio and frankly across the United States, the report we prepared for the Building Industry Association indicated that we have a need for about 14,000 to 19.000 units per year to meet current demand levels,” Vogt said. “We’ve been pretty consistently right around 12,000 units we’re continually contributing to the overall deficit of housing in Central Ohio.” The lessons learned during the pandemic indicated that there was little movement because renters didn’t have anywhere to move to, often accepting 10% rent increases because they didn’t have a choice. For the apartment industry in Columbus, the pandemic was actually a positive. There was a huge savings during the pandemic which allowed a lot of households to be created because they had a lot of housing choices. Coming out of the pandemic we also had a very strong economy that contributed to the household growth. Remote work drove over 60% of the price surge of housing. As people were saving money elsewhere it allowed them to spend money on housing. With the lack of production of single-family houses and an increase in interest rates, its people planted in multi-family housing. The Great Recession created a huge plunge in the production of housing, which has contributed to the shortage being seen in Central Ohio. “The increase in production of housing we’ve seen over the past few years, and these numbers are trending upward, it’s still not enough,” Vogt said. “We clearly have a deficit.” Design will have an impact on future housing, Vogt predicted that projects will see a focus on communal office space and business facilities as a new amenity. Work from home has stabilized at roughly 30%. “This is one of my concerns about the downtown housing market, since we’re not seeing office workers returning to downtown to work and we get a lot of support for housing from renters who are working downtown, we’re not seeing those numbers returning. I’m really concerned about that’s going to impact the downtown hosing market,” Vogt explained. “The other thing I’m concerned about is that we have a lot of vacant office buildings downtown right now and that problem is going to be magnified as we add places like the Scioto Peninsula, Astor Park and things like that.” However, it was not all good news, the progress in developing affordable housing has not been made in the strides it should be, not for lack of trying Vogt acknowledged. The statistics on the households that are severely overburdened is a number that is constantly increasing in overall households. Vogt predicts that only a fraction of the planned units will come to fruition. He believes that downtown will continue to see a high vacancy rate and that only time will tell how it will move in the future. Regarding Intel, Vogt believes Mount Vernon, Johnstown and Newark will be developed as a result and that Intel may have an impact on the downtown market as well. “Everyone looks at Bridge Park and how successful that project has been. I think there’s going to be a lot of people looking at the potential to build up those kinds of mixed-use projects. They really respond well to what the market is looking for today,” Vogt said. “We haven’t seen a lot of for rent single family houses, but given the cost of new houses and how financing has gone up, I still believe this is going to be a popular alternative.” Swanson thanked members for attending and encouraged them to keep an eye on the CAA calendar for upcoming events. Download a copy of the slide deck, click here.