Market Analysis Sunset Hampton Apartments Hampton, Virginia
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Market Analysis Sunset Hampton Apartments Hampton, Virginia Prepared for: Mr. Brian Staub Marlyn Development Corporation June, 2018 S. Patz and Associates, Inc. 46175 Westlake Drive, Suite 400 Potomac Falls, Virginia 20165 1 June 11, 2018 Mr. Brian Staub Chief Financial Officer Marlyn Development Corporation 308 35th Street, Suite 101 Virginia Beach, VA 23451 Dear Mr. Staub: This will set forth our full narrative market study for the proposed development of the 160-unit Sunset Hampton Apartments that are planned to be built during 2019 and 2020 for 2021 delivery and occupancy on an attractive site in the Sunset Creek neighborhood of Hampton, Virginia. The apartments units are to be affordable, with rents limited at or below 60% of AMI for the Hampton Roads Region of Virginia. Once built, Sunset Hampton will have rent and income restrictions, but no age restrictions. Our analysis determined that the Sunset Hampton proposal was very attractive and will be very competitive for the Newport News/Hampton affordable apartment market. The units are properly priced, and the proposed rents are slightly below market. The units are spacious in size. The unit mix will serve a wide range of renter households. Sunset Hampton has basic amenities and an adequate number of on-site surface parking spaces. The income market for Sunset Hampton, consisting of affordable units at or below 60%of AMI, has a low vacancy rate and a limited supply of affordable apartments units that are comparable with the Sunset Hampton proposal. Vacancy does exist for older and less attractive properties. Two apartment pipeline proposals are under construction or in active planning and will add 150± new units to the market. However, with these additions, the market area has a net demand of 670 units for the forecast period to 2021. The resulting capture rate for the Sunset Hampton proposal, is 17.9 percent, which is well within the acceptable supply-demand range. We expect full market support for the proposal, with a likely lease-up period of 6 months from the start of active planning. 2 Mr. Brian Staub June 11, 2018 The detailed market and economic data that are required for market studies to be presented to VHDA, are included in the attached report. Please call if additional data or clarification are required. Sincerely, Stuart M. Patz President SMP/mes 3 TABLE OF CONTENTS PAGE Section I Introduction ......................................................................................................................................... 5 Description of Market Area .............................................................................................................. 7 Sunset Hampton Apartments ............................................................................................................. 8 Site Description ................................................................................................................................... 8 Site Setting ......................................................................................................................................... 12 Development Program .................................................................................................................... 21 LIHTC Rent Comparison ................................................................................................................ 22 Site Plan and Building Design ........................................................................................................ 22 Building Floor Plans......................................................................................................................... 25 Unit Floor Plans ................................................................................................................................ 26 Development Costs .......................................................................................................................... 29 Summary ........................................................................................................................................... 29 Market Area Economic Overview .................................................................................................... 30 At-place jobs ............................................................................................................................... 30 Employment and Labor Force ................................................................................................. 33 Current Developments ............................................................................................................. 35 Section II Apartment Market Analysis .................................................................................................... 38 Demographic Trends and Projections .................................................................................... 38 Households ....................................................................................................................................... 39 Renter Households ........................................................................................................................... 40 Target Renter Households .............................................................................................................. 40 Renter Households by Size ............................................................................................................. 41 Competitive Apartment Market ....................................................................................................... 41 Characteristics of the Market .......................................................................................................... 41 Unit Mix by Income Restriction ..................................................................................................... 50 Rental Rates ....................................................................................................................................... 51 Recent Rent Changes ....................................................................................................................... 53 Rent Per Square Foot........................................................................................................................ 54 Apartment Unit Sizes ...................................................................................................................... 54 Apartment Unit Mix ........................................................................................................................ 55 Community Amenities .................................................................................................................... 56 Section III Conclusions ...................................................................................................................................... 58 Analysis of Affordable Apartment Unit Demand ......................................................................... 59 Affordable Apartment Pipeline ..................................................................................................... 59 VHDA Demand Chart ..................................................................................................................... 62 4 Section I Introduction Following is the full narrative market study for the proposed 160-unit, Sunset Hampton Apartments proposal, planned for development along Victoria Boulevard in Hampton, Virginia during 2019 with project opening and initial lease-up expected in 2020. The proposal is for affordable housing, to be financed under the Low Income Hosing Tax Credit (LIHTC) program, with non-taxable bonds and at rents at or below 60 percent of AMI for the Hampton Roads marketplace. Once built, Sunset Hampton Apartments will have rent and income restrictions, but no age restrictions. The market study will be submitted to officials of Virginia Housing Development Authority (VHDA) for tax credit financing. Thus, the report has been prepared under the current VHDA market study guidelines for 2018 applications. To follow these guidelines, the report is prepared in three separate sections. The first, the Introduction, presents a detailed description of the apartment proposal and its setting within the Sunset Creek community of Hampton. Along with the analysis of the development proposal, Section I evaluates the site and its setting within a mature section of the City of Hampton and the community and public facilities that serve this neighborhood. Proximity to schools, medical care, shopping and recreation are key neighborhood components for study. A second part of Section I is the economic overview analysis of the defined market area for the site. This includes an analysis of at-place jobs and employment growth, including active development proposals that will generate net new employment. These economic factors are key determinants of the market area stability and setting for new real estate investments of the type proposed. Also, employment is a factor that generates population and household growth, and in turn, housing unit demand. Key changes in market area employment have 5 generated market support for new housing development, particularly affordable housing, as planned at Sunset Hampton Apartments. Section II is the supply/demand analysis. Demand for new affordable apartment units is based on household income growth for renter households with incomes between $30,000 and $45,000, when incomes are reported in constant 2018