more photosWoodhill Homes partner Jay Campbell stands Thursday in front of the Glacier Vista apartments that Woodhill built in Redmond and opened last week. Glacier Vista is the first apartment complex built in Redmond in several years.
Pete Erickson / The Bulletin
After years, Redmond gets new apartments
Tighter lending standards and rising foreclosure rates mean greater demand for rental units, developers say
By Jeff McDonald / The Bulletin
Published: April 11. 2008 4:00AM PSTCentral Oregon’s housing-rich landscape has seen few apartment complexes built in recent years, but at least one pair of developers see an opportunity in Redmond.
George Hale and his partner, Jay Campbell, opened the first new apartment complex in Redmond last week in at least five years. Glacier Vista, a 48-unit complex, will be Woodhill Homes Inc.’s first apartment project in Redmond.
Tight credit markets and escalating foreclosure rates have increased demand for new apartment units, Hale said.
“Everybody used to buy a house, and nobody had to rent,” Hale said. “But we don’t have enough apartment supply. I think the demographics are there for a while because people are choosing to rent.”
Bend and Redmond’s vacancy rates for all rental properties in the first quarter of 2008 were 6.7 and 6.6 percent, respectively, according to a market survey completed Tuesday by the Central Oregon Rental Owners’ Association.
The vacancy rates were about “middle-of-the-road” for those two cities, according to Terry Luelling, president of the 600-member association.
“Apartments are renting fairly quickly because so many have been taken off the market to ‘condominium-ize’ them,” Luelling said. “Some of those (converted condominiums) could be converted back or rented because they haven’t been selling very well.”
In Redmond, the last new apartment complex was built more than five years ago, but it was converted to condominiums last year, said Wayne Sorensen, principal planner for the city.
Other apartment complexes date back to the 1970s, Sorensen said.
Another developer, Hayden Watson, is planning the King Way Retail & Residential Community for northeast Redmond.
The project, which still needs final approval from the city, would include 168 condominiums for sale and 220 apartment units for rent, according to plans filed in November by Watson, CEO of Hayden Homes.
Hale, who also plans at least 100 new apartment units in the northwest part of the city, sees the opportunity in Redmond coming from cheaper land costs. That helps projects pencil out better than in Bend, he said.
Rents for one- and two-bedroom apartments have to be kept in the $500- to $600-per-month range for people to choose to rent rather than buy a townhome, condo or house, Hale said.
Redmond rents in the first quarter averaged $464 per month among 31 one-bedroom units included in the Central Oregon Rental Owners’ Association survey. Two-bedroom rents averaged $527 among 170 units surveyed.
By comparison, Bend rents in the first quarter averaged $548 per month among 63 one-bedroom units included in the survey. Two-bedroom rents averaged $607 among 125 units surveyed.
The president of the Central Oregon Rental Owners’ Association noted that rents still need to get higher before more apartment complexes are built in Central Oregon.
National apartment builders are waiting for the opportunity to build larger complexes in the region, Luelling said.
“We’ve been getting calls from title people researching this area all the time,” he said. “We just haven’t seen much going on because rents are too low and land prices are still too high. But as soon as the land prices go down enough and rents go high enough, they’ll come in and build big apartment buildings like they have in other areas and out of state.”
The housing downturn has created opportunities in apartment and mobile home park construction, said Bruce Kemp, president of Compass Commercial Real Estate Services.
“Apartment housing is one of the few strong sectors of the industry,” Kemp said. “People who have faced foreclosure activity or have credit problems end up renting an apartment with substantially lower payments.”
Lenders are still “very interested” in financing apartment construction, as well as mobile home park construction, Kemp said.
Loans are hard to get, and fees are high for home builders, said Brian Albrich, a loan officer and partner at Arbor Mortgage Group in Bend.
“The traditional lines don’t exist anymore,” he said. “It’s crazy. Most builders are very discouraged about the products that are available to them, even those with excellent credit.”
Sales have dropped at Hale’s residential developments in Bend and Redmond from about 100 houses per year during the 2004 to 2006 boom years to 33 homes last year, he said.
The company plans to build about 45 homes this year in Central Oregon, he said.
“We have a machine that ultimately you want to keep moving,” Hale said. “We foresaw this coming two years ago. Home building is tough right now.”
Jeff McDonald can be reached at 383-0323 or at jmcdonald@bendbulletin.com.
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