(Graphics | Courtesy of Compass Commercial)
The talk of the multifamily community these days is the apartment building boom. Central Oregon has experienced a housing shortage for the last several years. The city of Bend is encouraging more multifamily housing. Historically, roughly 60 percent of all residential units constructed in Bend are single-family, and 40 percent are multifamily. Public officials want to reverse this trend, with a strong focus on increasing density to allow for more multifamily units.
One concern of owners and developers is the potential for oversupply leading to vacancies and downward pressure on rental rates. So far, this has not been the case. Absorption remains strong, with new units being leased as soon as they become available. There are few concessions being offered in the market and rent growth continues modestly.
According to a 2018 HUD study, the Bend-Redmond MSA would require about 600 new multifamily units per year from 2018 through 2021. The COVID-19 pandemic has created an even greater demand for housing due to the increased number of people moving from urban areas, aggravating the housing shortage. It seems likely that the 600 new units per year will not be enough to meet demand.
How many multifamily units are being built?
In the city of Bend, 482 new multifamily units have come online in the past two years. There are currently 813 units under construction, which totals 1,295 units, an average of 431 units per year between 2019-2021. There are 1,486 units in the pipeline, which could be delivered in the next two to three years. Not all the pipeline projects will be built.
Redmond has seen explosive growth in the multifamily space, with several hundred units being planned, but so far, the City of Redmond has only issued permits for 127 multifamily units in 2020. Even though there are several larger projects in the planning process in Redmond, it is unlikely they will be able to deliver product before 2022.
Some of the most notable recent deliveries in Bend include the 203 premium units at The Hixon at Westside, 120 units at the Reserve at Brookswood and 67 Units at The Nest. Currently under construction are 240 affordable housing units at Stillwater Crossing in South Bend, 141 units at 171 SW Shevlin Hixon Drive and 130 units at Outpost 44 on Boyd Acres Rd. In Redmond, 144 units at Triple Ridge is near completion, and 90 units at Ridgeview Heights were recently delivered and fully leased.
What does this all mean?
The housing crunch will likely remain as demand will still exceed supply, assuming the population influx continues.
While there have been substantial rent decreases in high-cost West Coast cities, that has not been the case in Central Oregon. So long as people keep moving in, multifamily construction will be in high demand. The real threat facing multifamily development over the next decade in Central Oregon is the lack of high-density land supply available for development. While any market can experience short-term spikes in vacancies due to a large number of unit deliverables in a given year, the lack of development land and increasing product demand will keep multifamily vacancies low for years to come.
As always, if we can be of any assistance with buying or selling multifamily properties, or just being a source of information for you, please do not hesitate to contact Ron Ross, CCIM at 541-322-1230, Terry O’Neil, CCIM at 541-848-4060 or Dan Kemp, CCIM at 541-550-8413.
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About Compass Commercial Real Estate Services
With integrated services in brokerage sales, leasing, asset and property management and construction services, Compass Commercial helps buyers, sellers, landlords and tenants achieve their unique commercial real estate goals. The team’s collective industry expertise includes one of Central Oregon’s only Society of Industrial and Office Realtors (SIOR®) designees, 12 Certified Commercial Investment Members (CCIM), one Certified Property Manager (CPM®) designee, one Certified Retail Real Estate Professional (CRRP) and one Real Property Administrator (RPA®) designee. In addition, Compass Commercial holds the distinguished honor of being one of 550 worldwide firms and the only Central Oregon based firm with an Accredited Management Organization (AMO®) accreditation from the Institute of Real Estate Management. Follow us on Twitter @CompassCom and on Facebook @CompassCommercial.