Portland builder wary of booming apartment market
POSTED: Wednesday, December 14, 2011 at 03:11 PM PT
Daily Journal of Commerce
BY: Angela Webber
Creston Homes is planning to start construction next month on a 71-unit apartment project at Southeast 20th Avenue and Morrison Street in the Buckman neighborhood. In contrast to the company’s project it started recently near the Hollywood Theatre, the Buckman Court Apartments will be a small, infill effort.
Creston Homes project manager David Mullens said that although the market for apartments is thriving, the company is being cautious. That kind of approach makes sense, brokers say, in light of the economic collapse in the last few years.
Several of Creston Homes’ projects in the past few years – such as one at 1516 N.E. Hancock St. in the Irvington neighborhood – have simply added small pockets of density. The firm seems to have a steady stream of projects, and vacancy in the local apartment market is below 3 percent; however, Mullens chose his words carefully.
“There are some niche opportunities that have come up, but I am not ready to say that now is the time to go and build apartments,” he said. “We’re trying to do what we do and do it quietly.”
One of Mullens’ concerns is that the apartment market looks so good that it will be overbuilt by the time many new projects open. Brokers, however, say that scenario likely won’t occur.
“The concern of overbuilding is being able to have rents be viable (to cover project cost) by the time a product comes on the market,” Winkler & DuPont principal broker Beth DuPont said. But “there really is a lack of strong inventory coming on the market.”
That doesn’t mean that market growth won’t make an impact, NAI Norris, Beggs & Simpson Vice President Robert Black said.
“There are a lot of proposed infill sites going through permitting on the east side. None are significant enough in size to cause an oversupply; they may just keep rental growth at bay,” Black said. “Right now rents are growing really fast.”
Creston Homes likes small parcels ready for redevelopment, Mullens said. The Hollywood Apartments are being built on a long-vacant site, and the Buckman Court Apartments will replace two duplexes and a recording studio. Neighbors are glad to see new construction, he said.
“There was a prior development attempt on the site by the prior owner, but he ran into the economic times,” Mullens said. “There are thousands of projects like that all over Portland.”
The market being targeted by Creston Homes is one that will absorb mostly one-bedroom and studio apartments approximately 300 to 500 square feet. Comparable units will be in the new Buckman Court Apartments.
“The term ‘workforce housing’ has been used over and over again,” Mullens said. “This kind of fills that gap for people that are either in health care or service positions around town. They just don’t want a big place to live.”
DuPont said that Portland’s east side is likely to gain more of these small apartments.
“I think there’s always a place in the market for a smaller infill apartment project that’s a little more recession-proof,” she said.
Creston Homes is in the process of securing demolition and construction permits for the Buckman Court Apartments project. If everything goes according to schedule, Mullens expects construction to start in late January 2012 and last for 12 to 14 months. He said Creston has some other projects in the pipeline; however, he wouldn’t discuss them.