By now, whether it be the developer looking to build a top end A property, or the lowly apartment prospect looking to lease a “low” rent studio apartment, everyone that is involved in multifamily can see the steady increase in the strength of the industry that hasn’t been seen comparatively in years.
Renewal rates are increasing. Concessions are becoming obsolete. Vacancy numbers are dropping. Developers are trying to help balance the demand by building more new communities (side note…hopefully we do not see a repeat of what happened with the housing market in 2008 and have an over saturation of apartment communities with this “boom.”)
As a developer this is by far one of the best scenarios to begin building, if the financing can be found, because the American dream has gradually worked its way over to renting as opposed to owning an amazing new home. The flexibility of being able to move from place to place has replaced the iconic image of having a home to weigh one down. Developers are always looking to build where the demand is highest, but another factor that should always be taken into account is where to develop where the COSTS are lowest.
NAA releases an annual survey of income & expenses each year highlighting where the most expensive places in the country are to operate, as well as where the most cost efficient places are to run a community. Here is the list of both categories:
Highest Net Operating Expenses
1. Miami-Miami Beach-Kendall, Fla.
2. Los Angeles-Long Beach, Calif.
3. San Francisco-Oakland, Calif.
4. Fort Lauderdale, Fla.
5. Oxnard-Thousand Oaks-Ventura, Calif.
6. San Diego-Carlsbad-San Marcos, Calif.
7. Boston-Cambridge-Quincy, Mass.
8. West Palm Beach-Boca Raton, Fla.
9. Washington, D.C.-Arlington-Alexandria
Lowest Net Operating Expenses
1. Eugene-Springfield, Ore.
2. Evansville, Ind.-Ky.
3. Albuquerque, N.M.
4. Bloomington, Ind.
5. Tulsa, Okla.
6. Knoxville, Tenn.
7. Winston-Salem, N.C. (tied for 6)
8. Colorado Springs, Colo.
9. Chattanooga, Tenn.
10. Little Rock, Ark.
Any of the cities on this list surprise anyone? Obviously the number one being Miami (net operating cost per unit=$6,193!) should not have been a shocker as I am sure they are consistently number one year after year. I thought it was interesting to see how scattered the bottom ten were throughout the country and how seemingly isolated to basically two states the top ten were. Nonetheless it’s a very interesting to take into account from a developer side and I am sure anyone involved in those top ten can vouch for how pricey their operating costs are!