ARTICLE
Annual Industry Forecast Leans Toward Renting On Thursday, March 12 CAA members gathered for the first General Meeting of the year and an industry forecast largely based on a pre-COVID-19 environment. Those in attendance were anxious to hear what Rob Vogt of Vogt Strategic Insights would say regarding multifamily housing. Vogt began by saying he gets a question frequently about when the market will lose renters moving into a single family house, “I wanted to present some of the ideas and thoughts about why I think it’s not going to happen in any great number and present my thought process about why I have that notion.” Focusing on the 2019 highlights, stating that rents moderated in 2018 and increased 3.5% in 2019 versus the 5% in 2018. Overall vacancy remains unchanged at 4.6% in 2019. Also, B & C properties remain well occupied with only a 2.7% vacancy rate. Vogt attributed the rate to the demand for affordable housing in Central Ohio. In A properties, lower rent growth was seen with a slight uptick in vacancy. In 2019 the area saw nearly 2600 units come online. “We’ve seen some reduced rent growth in the market with 2.7% over the last year, when over the past three years it was closer to 4.4%,” Vogt said. “The other important thing to note is that Columbus lags behind the Midwest in terms of asking rents. People think we have really high rents in Central Ohio, but when you look at the statistics, we’re continuing to lag behind some of our peer cities in the Midwest.” Vogt noted that a lot of the 2019 statistics mirror the 2018 statistics stating there’s a lot of consistency and in the market. The highest rate of vacancy is seen in the University District due to the number of units that have come online. Vogt had expressed concern about the Hilliard and Westerville markets given the amount of product scheduled, however it has been well absorbed. “It is expected that almost 20,000 units are in the planning process compared to 16,000 units in 2018. The important thing to keep in mind is only a fraction of these units are going to be built and it’s hard to gauge exactly how many of these units will be built,” Vogt said. “When you consider that we had 16,000 units planned last year and we only had about 2800 units constructed, it’s important to keep an eye on whether these units are going to come to fruition.” Columbus continues to lag in construction, Columbus isn’t building enough to meet the housing needs of those in Central Ohio. “Not only are we not building enough housing, we’re not building enough housing targeted to first time home buyers, that’s why I think we’ll continue to see people rent,” Vogt said. “It’s not a black and white issues, it’s a gray area. You start to understand it’s effect over time.” Vogt said it will happen slowly overtime, not in great numbers as happened in the 2000s. Baby Boomer’s had a need for suburban living, Gen X was swept up by suburbanization, following along with the Baby Boomers. After the great recession, the Millennials attitude toward housing changed. The internet is molding Gen Z. The characteristics of each generation will lead to multifamily housing be desired for a long time according to Vogt. He noted that the share of homeowners would continue to decline over the next 20 years. He noted that there are four basic elements that shape housing: demographics, economics, lifestyle and product changes. “On the demographic side we’ve seen households getting smaller. The fastest growing household size is single renters. We’ve seen delayed marriages, families are having fewer children and there’s less need for larger houses,” Vogt said. From an economics standpoint the cost of buying a house is 40% higher than when their parents were buying. The wage growth isn’t increasing the way it has in the past and the issue of amount of student debt along with the removal of some mortgage benefits. Additionally, the cost of owning a house is increasing at a greater rate than rent. Lifestyle is demanding the urban setting. Millennials want to live near where they work and have access to good transportation. They want walkability and diversity. Millennials and Gen Z don’t have time to spend on their homes. The product choices are leading to higher rental demand. Houses aren’t being built where people work and they’re not being built to be maintenance free. Those looking want homes that have been renovated to their specifications. Diverse mixed-use neighborhoods are lacking. Homes are also larger than what most need. “Apartment developers have developed that piece of the market. They’ve developed high density walkable, close to entertainment. They’re open, dynamic floor plans, they have high end finishes, décor that responds to today’s lifestyle and luxury project amenities.” Vogt noted. A copy of Vogt’s powerpoint presentation can be found below.
On Thursday, March 12 CAA members gathered for the first General Meeting of the year and an industry forecast largely based on a pre-COVID-19 environment. Those in attendance were anxious to hear what Rob Vogt of Vogt Strategic Insights would say regarding multifamily housing.
Vogt began by saying he gets a question frequently about when the market will lose renters moving into a single family house, “I wanted to present some of the ideas and thoughts about why I think it’s not going to happen in any great number and present my thought process about why I have that notion.”
Focusing on the 2019 highlights, stating that rents moderated in 2018 and increased 3.5% in 2019 versus the 5% in 2018. Overall vacancy remains unchanged at 4.6% in 2019. Also, B & C properties remain well occupied with only a 2.7% vacancy rate. Vogt attributed the rate to the demand for affordable housing in Central Ohio. In A properties, lower rent growth was seen with a slight uptick in vacancy. In 2019 the area saw nearly 2600 units come online.
“We’ve seen some reduced rent growth in the market with 2.7% over the last year, when over the past three years it was closer to 4.4%,” Vogt said. “The other important thing to note is that Columbus lags behind the Midwest in terms of asking rents. People think we have really high rents in Central Ohio, but when you look at the statistics, we’re continuing to lag behind some of our peer cities in the Midwest.”
Vogt noted that a lot of the 2019 statistics mirror the 2018 statistics stating there’s a lot of consistency and in the market. The highest rate of vacancy is seen in the University District due to the number of units that have come online. Vogt had expressed concern about the Hilliard and Westerville markets given the amount of product scheduled, however it has been well absorbed.
“It is expected that almost 20,000 units are in the planning process compared to 16,000 units in 2018. The important thing to keep in mind is only a fraction of these units are going to be built and it’s hard to gauge exactly how many of these units will be built,” Vogt said. “When you consider that we had 16,000 units planned last year and we only had about 2800 units constructed, it’s important to keep an eye on whether these units are going to come to fruition.”
Columbus continues to lag in construction, Columbus isn’t building enough to meet the housing needs of those in Central Ohio.
“Not only are we not building enough housing, we’re not building enough housing targeted to first time home buyers, that’s why I think we’ll continue to see people rent,” Vogt said. “It’s not a black and white issues, it’s a gray area. You start to understand it’s effect over time.”
Vogt said it will happen slowly overtime, not in great numbers as happened in the 2000s. Baby Boomer’s had a need for suburban living, Gen X was swept up by suburbanization, following along with the Baby Boomers. After the great recession, the Millennials attitude toward housing changed. The internet is molding Gen Z. The characteristics of each generation will lead to multifamily housing be desired for a long time according to Vogt.
He noted that the share of homeowners would continue to decline over the next 20 years. He noted that there are four basic elements that shape housing: demographics, economics, lifestyle and product changes.
“On the demographic side we’ve seen households getting smaller. The fastest growing household size is single renters. We’ve seen delayed marriages, families are having fewer children and there’s less need for larger houses,” Vogt said.
From an economics standpoint the cost of buying a house is 40% higher than when their parents were buying. The wage growth isn’t increasing the way it has in the past and the issue of amount of student debt along with the removal of some mortgage benefits. Additionally, the cost of owning a house is increasing at a greater rate than rent.
Lifestyle is demanding the urban setting. Millennials want to live near where they work and have access to good transportation. They want walkability and diversity. Millennials and Gen Z don’t have time to spend on their homes.
The product choices are leading to higher rental demand. Houses aren’t being built where people work and they’re not being built to be maintenance free. Those looking want homes that have been renovated to their specifications. Diverse mixed-use neighborhoods are lacking. Homes are also larger than what most need.
“Apartment developers have developed that piece of the market. They’ve developed high density walkable, close to entertainment. They’re open, dynamic floor plans, they have high end finishes, décor that responds to today’s lifestyle and luxury project amenities.” Vogt noted.
A copy of Vogt’s powerpoint presentation can be found below.