With many new multi-family units sprouting up all across the city last year was a record setting year for activity in Eugene real estate development. While this glut of construction has made it a renter’s market for multi-family complexes, as St Clair Properties predicted single-family homes and duplexes that were close to campus for the most part avoided vacancy and their owners came into the year still positioned to generate solid returns on their campus area investment properties.
Although newer apartments complexes may offer amenities such as modern kitchens and high ceilings, many students still prefer the single-family living experience. In addition, hundreds of properties were demolished in order to build the new apartments, making single-family homes even more difficult to find and further increasing their demand. While most single-family properties were able to adapt and overcome the increase in supply, multi-family units did not adapt as well.
A reputable local appraisal firms recently completed a vacancy survey on multi-family units near campus highlighting some of the tangible effects that the increase in supply had on the market.
As of the first week of classes in early October, the overall vacancy for multi-family units near campus was approximately 9%. This compares with a 5% vacancy rate that was surveyed during the first week of classes last year. After receiving the data, St Clair Properties recognized a number of interesting trends:
- Approximately 1,350 bedrooms were added in 2014-2015.
- Both older and newer complexes showed higher than historic vacancy. Vacancy was not limited to the newly completed complexes. Older complexes showed a similar overall vacancy rate as newer complexes. However complexes that were recently completed for the 2014-2015 school year showed the highest vacancy at approximately 25%.
- No vacancy trends were noted based on location, age, amenities, or unit mix. However, approximately 70% of the complexes surveyed were 100% occupied, with most of the fully occupied complexes being smaller-sized walk-up complexes. It also appears that many less appealing units gained occupancy with incentives or reduced rents.
- More units are on the way. There are approximately 1,550 new bedrooms that will be added to the campus market for the 2015-2016 school year. Most of these bedrooms will be in purpose-built student housing.
New construction projects at this point have come to a halt for the most part. The 1550 new bedrooms that are being added during the next year are mostly REIT funded projects from out of state developers. Their plans were put into motion long ago and they are too large to stop or alter their projects. As these projects come to an end we predict that we will see a period of tightening rental market with this school year and next school year being the most competitive for landlords. However, the market also gives signs to be optimistic. For example, the rapidly increasing population of Lane County. From July 2013 to July 2014 the population of Lane County increased by 2,680 or .8 percent. This is the largest increase since 2007 and is a major factor in absorbing the excess number of units that are being completed.
Moving forward, St Clair Properties has full confidence in the market. With active management and thoughtful guidance we are certain that single-family investment properties in Eugene, OR will continue to provide strong returns and exciting opportunities for current owners and potential investors alike.
Written by John Tucker Livingston Bullier, with insight from James St. Clair.