Key Takeaways from our Multifamily Development Real Estate Connection

At the end of January, we held the first of our three annual Real Estate Connections. With over 100 registrants, Alpha Media’s Skype Live Studio provided near to comfortable capacity for what always proves to be one of our highest attended events of the year. The reason? While we’d like to think it was due to our riveting annual tax update, provided by one of our tax senior managers, Trent Baeckl, CPA, we’re inclined to think it had more to do with the draw of our featured speaker, Clyde Holland, Chairman and CEO of Holland Partner Group (HPG); the Vancouver, Washington based fully-integrated real estate investment company.

Primarily responsible for, among other things, the strategic direction of HPG, Clyde provided our attendees insight into current trends and future predictions for multi-family residences in the Portland and Vancouver Metro areas, and into some of the western states’ most dynamic markets.  HPG was founded in 2001, and currently has approximately $7.5 billion in 30,000 apartments (homes) in assets under management and development.

If you weren’t able to attend, you missed a compelling and in-depth presentation and discussion on the state of multi-family development and its future. Here are a few key takeaways:

  • The most recent recession slowed housing starts to a pace far below that of population growth, leading to a dearth in housing supply, including apartments and single-family homes.
  • The main driver of the recent spike in housing prices lies in the economics of supply and demand (little supply and high demand).
  • Restrictive building and zoning regulations and the inflation of building materials and labor costs (labor shortage) are several of the factors hindering faster development.
  • The recent boom in development has caused a massive increase in the demand for all aspects of construction:  labor, land, materials, and government approval.  The resulting cost spike is eating into the investment returns a project can expect, limiting options for many real estate developers.  These factors also drive up the price to consumers, particularly in the highly sought high tech cities in the west.
  • Further, while the average US wage growth has slowed, specialized niche industries (specifically tech jobs) located in regional pockets in the US are seeing higher than average wage growth, leading to higher than average construction demands and costs.  These industries and pockets show little signs of slowing.
  • In time, the effects of these booming industries and pockets will help lead us out of our supply scarcity into a more comfortable equilibrium and provide us with innovative models of beneficial urban design.

Those in attendance absorbed the extensive data sharing and insights from Mr. Holland.  If you’re inclined to learn more about Clyde or the Holland Partner Group, please visit their website.

As we noted above, our January Real Estate Connection began with an annual real estate related tax update from Trent Baeckl, starting with an overview of the PATH Act, the 223 page tax omnibus act from 2015, along with local tax changes.  Parsing it down to a sixteen-slide presentation, Trent briefed the audience on the important changes affecting anyone in the real estate industry, such as Tangible Property Regulation (TPR) changes, and the Oregon Kicker.  To learn more about what was covered in our annual tax update, click here to access Trent’s full presentation.

For tax advice and further information, please speak with your accountant to ensure you’re in compliance.

If you missed the first Real Estate Connection in our annual series, we hope to see you in the early summer for our second event (date TBD).

This blog post is a summary and is not intended as tax or legal advice. You should consult with your tax advisor to obtain specific advice with respect to your fact pattern.