Sale to Asking Price Differential-Click to Enlarge

What are investors buying? Metropolitan Portland 2011 year-to-date investment sale transactions are primarily segmented by 25% Retail, 19% Multifamily, 18% Industrial, 15% Land and 13% Office. The investor profile for multifamily investors in the 25-100 unit range are 76% from Portland MSA Oregon with almost all of the remaining 24% residing in California. The for-sale properties have posted a steep decline in the number of days on market with asking cap rates trending downward from 6.75% to 6.54%. This was likely instigated by the improving financing climate.

Apartment lenders have re-entered the market. The Portland MSA year-to-date results so far are encouraging with an average acquisition financing loan-to-value ratio of 75% for 25-100 unit transactions. With a corresponding down payment of 25% and low interest rates, we see the sale to asking price variance narrow since we last reported in the spring 2011 e-letter.  Also with an improved financing climate, apartment transaction sales volume has increased in the first half of 2011 over the prior semi-annual period second half of 2010. Sale to asking price differential as depicted by the chart shows two consecutive quarters (Q1-2011 and Q2-2011) with a narrowing gap in seller and buyer negotiations. Approximately a 6.43% sale to asking price gap was reported in the last full quarter of data, Q2-2011.

Murray Village 360 Units Under Construction

The volume of land sales in the first half of 2011 has surpassed the volume of the second half of 2010. Land sales volume year-to-date 2011 accounted for 15% of all investment real estate transactions and even edged out office building sales at 12%. The residential land sales price per acre statistics depict a wide variance in land location, entitlement processing and expected hold period. The chart shows metropolitan Portland to have a lower land sales volume trend that has stabilized and pushed upward in the first half of 2011.   Expanding land use restrictions, topography-soil constraints of remaining UGB parcels and costly permit fees that offset infrastructure costs of: roads, schools, public safety, water sewer and parks all combine to focus developers on the best locations where housingprices/rental rates will justify construction. Look for construction activity of infill locations, such as the recent ground breaking of Steed Group, LLC's development of a 26 acre mixed use site that will include 360 housing units in Beaverton across from the Nike World Headquarters.  The City of Beaverton helped successfully navigate this mixed use development through the permit process which follows the city's momentum with the opening of Graymor's  200,000 square feet, Progress Ridge Townsquare.

Block 49 Under Construction

Block 49, a long planned 209 unit affordable housing development in the South Waterfront neighbrohood is underway.  These affordable housing units include a set aside of forty-two units for veterans earning less than about $15,000 per year.  This Block 49 midrise is being developed by the local non-proft Reach CDC in collaboration with the Portland Housing Bureau.

Construction jobs for architects, surveyors, engineers, city/county planning departments, suppliers, sub-contractors and contractors will all benefit from an uptick in construction activity. The National Association of Home Builders estimates that each new single family home creates three jobs.

*Data in this e-letter is from sources that include Costar.  A sample size of 25-100 apartment units was used for consistency purposes, within metropolitan Portland, Oregon.