Willamette Valley Apartment Market Summary

1.   Conventional Apartment Market: The conventional apartment market continues to remain strong in the Willamette Valley along the I-5 Corridor. There is also a strong regional interest in federally assisted apartment complexes.

 Tertiary markets off the I-5 Corridor are experiencing a lesser level of demand, but still remain strong.

2. Major Campus Apartment Market: The University of Oregon and Oregon State University campus markets are performing very well with a very strong tenant appeal and an extremely low vacancy factor. The recession has brought a heavy student enrollment, and that enrollment substantially exceeded the supply of student dorms and on-campus housing.

New Design Phenomenon: Those campus markets have experienced a quantum leap in apartment design:… “For Rent by the Bedroom”.

The newest apartment complexes have been built as three, four and even five bedroom units, and then are rented out individually by the bedroom. In some instances the rents approach $685 per bedroom. Four years ago, campus rents were more in the range of $650 to $800 per unit.  

The students share a common kitchen, living room and generally two full bathrooms. Several developers have experimented by adding flat screen TV’s and IPod docking stations in each room, together with plenty of high speed internet connectivity. Observation: Those complexes designed as five bedroom units have experienced lower appeal. The unrented bedroom is locked off and taken out of production.

3. The Buyers: Most of the market action is occurring with experienced investors who are generally well capitalized, and capable of covering the required 1.2 to 1.3 debt coverage ratio required of the apartment lenders. Action is moderate to strong by those taking advantage of 5% fixed interest rates.

4.   Apartment Loans: Interest rates on long term apartment financing have tightened a bit over the past six months. However, the change has not been as much as I would have anticipated. Interest rates to a near historically low level.

It is a great time to either buy apartments using moderate leverage, or refinance an apartment complex. You can fix the low interest rate  for at least 5 years, and even 10 or more years in certain situations.  You will look like a genius in the not too distant future.

Check back for my next blog on “The Benefit of Buying an Older Apartment Complex”.

To disucss your real estate needs don’t hesitate to call me Bob Nelson, CCIM  at (541) 485-8100.