by Gregg Davis
Q1 2019 is in the books and it was much as we expected. No significant increase in vacancy. Rents have continued to rise, albeit slower than we have seen in the past few quarters. The newest numbers from the ARES survey performed by Moe Therrien show the 5th straight year with reported vacancy under 3.5%. Average rents are up about 8% over last year.
Areas of the Treasure Valley have seen more rapid rental increases than others. Downtown Boise, Southeast Boise, The Village, Ten Mile Interchange, North Meridian and Eagle have been the target of
the majority of the new construction and development of Apartments in the past three years resulting in rapid rise in rental rates in those areas as new product demands higher prices. As these new units are delivered, we see an uptick in vacancy during lease ups in those areas. Those units are competing for the same target of higher income earners who either can’t or choose not to buy a home. That portion of the population is growing, but we may see stress on those newer, high-rent, full-amenity properties soon if construction continues at the current pace.
For every one of those areas, there is another area where rents have been held below market averages by the lack of land for infill development which has not allowed the new construction pricing to drive up rents. Some of those areas provide savvy investors with opportunity to add value to properties and increase rents and therefore create/force appreciation. Local investors have known about these areas for years, and out-of-state money is starting to trickle into those neighborhoods. It is no secret that the Boise Bench has amazing potential for redevelopment. That is the obvious next “Northend” area and money is pouring into the Bench. One of our clients has remodeled a small apartment community and taken rents from under $700 to over $1,200 per month. Others have seen less dramatic, but still significant increases from $675 up to $950 per month. The age and charm of the properties in the Bench captivate renters who have been priced out of the Northend.
Other areas that hold those “deals” that everyone is chasing are Southwest Boise, the mall area (around the Boise Towne Square Mall), pockets of the Westend that haven’t already been snatched up, the airport/Vista Ave south of Overland, older parts of Meridian, Garden City, Kuna, and even Nampa and Caldwell.
As high rents drive renters to look for more affordable housing, many are driving farther than ever to be able to afford rent. Wages, while up, have not kept up pace with rents. Those areas in the outlying Ada, Canyon, Gem and even Elmore county are seeing more and more commuters who work in Boise seeking refuge from the rental rates they are fleeing in Boise. These rental rate “refugees” are driving up rents in those areas as well as more and more renters compete for very few available units.
Some examples of investment scenario’s our clients have experienced in the past 18-24 months that demonstrate the value that exists in these areas are outlined below:
What’s the point? With the right team—one that knows the market rents, can manage the renovations and estimate the costs associated with those repairs, you can buy a property and add value, force appreciation, and grow your net worth. Our team at Commercial Northwest Property Management and KW Commercial, our brokerage arm, can help you find those neighborhoods that harbor potential gems, help you negotiate and purchase the property, manage the renovation and lease the units at the increased rates to create and grow your property value and in turn your net worth.
Contact us today to see how we can help you!