Property managers celebrated declining vacancy rates and rising apartment rents and looked forward to continued growth in the industry during a Feb. 19 meeting of the Northern Nevada/Tahoe chapter of IREM — Institute of Real Estate Management.
“It’s been a great year; that’s the truth,” said Debbie Warner, COO at Gaston Wilkerson Management Group. “We’re third in the nation because of you,” she said, addressing the apartment managers in attendance.
Warner referred to a recent study by apartment search startup ABODO that showed Reno apartment rents rose by 12 percent from January to February, the third fastest increase in the country. An expected population boom plus new companies moving into the region are fueling increases.
“Ten years ago, a flood of new units came in and rents dropped. Those units have now been absorbed,” Warner said.
“I thought rents would grow 3 percent last year, but you guys knocked it out of the park.”
Warner cautioned that wages in the area only increased 3.5 percent last year. Without comparable wage increases, she expects tenants will eventually say enough is enough when faced with more rent increases.
The sales market for multi-family properties in the Truckee Meadows has also been brisk.
Kenneth Blomsterberg, an apartment sales specialist and first vice president at Marcus & Millichap, said the past year has been hot, “not white hot, but definitely red hot.”
“Clients that I’ve talked to in the past had no interest in Reno,” he said. “Now they come and ask, ‘what have you got.’”
Buyers are not just from California but throughout the country, many seeking multiple transactions.
“The market is good and getting a lot of attention right now,” he said.
Tom Traficant, executive vice president and chief credit officer for Heritage Bank. addressed the industry from the lenders viewpoint.
“This robust recovery is very exhilarating,” he said.
“During the Great Recession we (in the Reno area) were very painfully the epicenter of real estate stupidity,” he said. “In 2005-2006, everybody could qualify for a mortgage. ... That’s not coming back any time soon.”
Traficant said he expects interest rates to remain low, but lenders will take a more conservative approach than during the boom years, to prevent the economy from heating up too much. “When that happens, bad things happen,” he said.
Don Wilkerson, senior vice president, public policy at Gaston & Wilkerson and a member of IREM’s national board who represents the industry in Washington, D.C., talked about public policy that will affect property management.
With Congress deadlocked and it being an election year, Wilkerson doesn’t expect too much action in Washington in 2016. But starting in 2017, he expects tax reform to be an issue. Such programs as 1031 Tax Deferred Exchanges could go on the chopping block, even though exchanges are not a tax loop hole, just a postponement of payment, he said.
“Billions of dollars in sales would not occur without exchanges. Exchange properties are also a catalyst for redevelopment or refurbishment, which will lead to a decline in neighborhoods (if they are cut).”
Of immediate concern is the Supreme Court decision on Disparate Impact, which Wilkerson called “scary.”
“This means that the right to continue a policy or practice, such as a credit check or background check, could have a disparate impact on a protected class, even though there is a legitimate business purpose for the practice or policy,” he said.
As an example he said that applying alimony income differently than other income in a rental application could be considered discriminatory to divorced women.
“Stayed tuned to see how the enforcement of this breaks down,” he said. “No doubt it will lead to lawsuits claiming discrimination, when no discrimination was intended.”
