Downtown Housing Prices

[Teo9969]

There's too many factors to tell, but overall history tells us rents go in one direction. Especially in a landlocked area of DT like Deep Deuce. If rents go down in 10 years that wouldn't be a good sign for DT, especially considering with inflation the prices of goods should 50% higher then today.

But rents aren't going to go a singular direction downtown. Downtown will not be homogenous the same way housing editions throughout the city are homogenous with their counterparts in a similar land area as downtown.

The average rent will likely increase for a period of no less than 10 years, but that doesn't mean that all rents will be higher. It will mean that there are some uber-expensive rents out there that bring the average higher, and that there will be a large share of newer or freshly renovated options that can and are charging a market average, but there will be units that lack amenities that become standardized over time and they will become cheaper because of that.

[hoya]

I'd expect housing prices downtown to keep rising as long as the market can support it. There is a whole lot of land near downtown that could soon have major residential developments on it. Once you start getting into the Farmers Market and Core to Shore areas, you're looking at space available for another two dozen LEVELs or the Edges.

With the prices they're getting, I doubt it is very long before we start seeing midrise or highrise towers going up. If the prices remain high, we'll get more and more towers. In a way, we are like a fat kid who just discovered chocolate cake. We are gorging on downtown housing and can't get enough. Eventually we'll feel sick and the market will slow down, but when that happens I don't know.

The part of me that wants the city to have tons of new skyscrapers is very happy that a lot of other people are willing to pay tremendous amounts of money to live downtown. Build, baby, build. The part of me that wants to live downtown myself wants the market to slow down a bit and prices to become more reasonable. I lived in downtown DC about 12 years ago, and my rent was substantially cheaper than the stuff here.

[gopokes88]

But rents aren't going to go a singular direction downtown. Downtown will not be homogenous the same way housing editions throughout the city are homogenous with their counterparts in a similar land area as downtown.

The average rent will likely increase for a period of no less than 10 years, but that doesn't mean that all rents will be higher. It will mean that there are some uber-expensive rents out there that bring the average higher, and that there will be a large share of newer or freshly renovated options that can and are charging a market average, but there will be units that lack amenities that become standardized over time and they will become cheaper because of that.

But over the course of 10 years inflation will lift rents faster then they decline. This assumes downtown doesn't further evolve and become even more desirable to live and push demand higher.

For the most part without rent controls (which creates slums) rent does go in one singular direction, up. Especially over a long period like 10 years.

[bchris02]

It's always more expensive to live downtown in almost every city. In fact, I am struggling to think of a single one where that isn't the case.

In OKC, personally I don't feel the amenities available downtown justify the current cost. That's my personal preference though and plenty don't feel that way. Sure you are close to entertainment but necessities like grocery stores and drug stores are less than convenient. Sure, by OKC standards a drive from downtown to Whole Foods at NW 63rd and Classen is something most people don't think twice about but in a big city that kind of distance to a basic amenity is unacceptable. Part of the justification of higher rents in a downtown area is convenience and less dependance on the automobile. OKC isn't there yet.

That will all change though in 5-10 years. There will be more rooftops and therefore grocers and pharmacy chains will take notice. Once the amenities are available in the core, I bet there will be even more demand pushing prices even higher, especially after the streetcar is built. Barring a collapse of the local economy, I will be surprised if there isn't at least one residential high-rise in the cars by 2025.

My guess is that developments will start to spring up in the suburbs that offer an urban, active lifestyle at a lower price than living downtown. Right now in OKC if you want to live an active lifestyle you have no option but to live downtown. Suburbs are for pumping out kids and raising families. That may change though sooner than many on here want to think. You are seeing this big time in major cities already. Places like Ballantyne in Charlotte or Frisco, TX come to mind. In OKC, my guess is you will start to see some developments in the Chisholm Creek area built to somewhat urban standards, though lower quality and lower cost than Deep Deuce.

[adaniel]

The average rent will likely increase for a period of no less than 10 years, but that doesn't mean that all rents will be higher. It will mean that there are some uber-expensive rents out there that bring the average higher, and that there will be a large share of newer or freshly renovated options that can and are charging a market average, but there will be units that lack amenities that become standardized over time and they will become cheaper because of that.

NYC is probably not the best example given how huge it is not to mention the geographic challenges, but as Manhattan filled in, rents in neighborhoods that gentrified/grew in the "first wave"...think East Village or UWS....have not dropped. Rather, they just solidified their standing as the top 'hood. They may not have increased as fast or even stagnated, but no drops at all. People desiring cheaper rents merely just moved to Brooklyn, Hoboken, etc. And now those areas are seeing similar issues. Closer to OKC, a lot of the older properties in Uptown Dallas are just as expensive as they've always been, they only seem cheaper in comparison to the ultra expensive newer properties going up around them. People wanting cheaper prices have moved on to Oak Lawn, Cedars, Deep Ellum, etc.

For rents to drop in relatively dense urban areas, something external has to happen, and none of it good. Either some sort of economic decline or increasing fears of crime would be the most likely events. For me it comes down to jobs. So long as the jobs in DTOKC are there I don't see any declines in the pipeline. If the properties, especially rentals, become in such bad shape that they start having to decrease their rents, it will likely be gobbed up and redeveloped. Remember this is OKC where everything over 30 yrs is "old and decrepit."

[hoya]

NYC is probably not the best example given how huge it is not to mention the geographic challenges, but as Manhattan filled in, rents in neighborhoods that gentrified/grew in the "first wave"...think East Village or UWS....have not dropped. Rather, they just solidified their standing as the top 'hood. They may not have increased as fast or even stagnated, but no drops at all. People desiring cheaper rents merely just moved to Brooklyn, Hoboken, etc. And now those areas are seeing similar issues. Closer to OKC, a lot of the older properties in Uptown Dallas are just as expensive as they've always been, they only seem cheaper in comparison to the ultra expensive newer properties going up around them. People wanting cheaper prices have moved on to Oak Lawn, Cedars, Deep Ellum, etc.

For rents to drop in relatively dense urban areas, something external has to happen, and none of it good. Either some sort of economic decline or increasing fears of crime would be the most likely events. For me it comes down to jobs. So long as the jobs in DTOKC are there I don't see any declines in the pipeline. If the properties, especially rentals, become in such bad shape that they start having to decrease their rents, it will likely be gobbed up and redeveloped. Remember this is OKC where everything over 30 yrs is "old and decrepit."

This presumes that demand stays as high as it is now. If they keep building and building, there's potential that those waiting lists will start to shrink. Manhattan has no shortage of demand. How will OKC look when every inch of Deep Deuce, Bricktown, Automobile Alley, Midtown, Film Row, etc, are full? Do we have enough people who want to live downtown to fill up those areas?

I think we probably do. I am excited to see how OKC fills in over the next ten or twenty years. But who knows, I may be wrong. Once those new complexes open up, Deep Deuce Apts may find themselves short of tenants.

[Teo9969]

Couple things:

1. I'm accounting for inflation here. If I can rent a 1k-sf apartment for $1500 in 2015 and can rent that same 1k-sf apartment for $1500 in 2020, and inflation has occurred, that unit is cheaper.

2. I don't believe we have a current demand for downtown that is quite as large as some would think. Unless we count Clayco's residential units, which is anything but sure at this point, we haven't had a major announcement of a residential development in over a year, coming on the heels of having major developments announced once every 6 months, there's clearly a bit of reticence by developers who are probably more aware of what's going on with the rental market than are we. Not saying we're maxing out at all, but I think it's pretty clear that the supply side does not have faith in the demand side to continue the pace we were at 2 years ago. And it can't be blamed entirely on Oil, as the last major announcement was Jan. 2014 (700 West) and there were many months in between that announcements could have been made before oil started it's precipitous decline.

[betts]

This presumes that demand stays as high as it is now. If they keep building and building, there's potential that those waiting lists will start to shrink. Manhattan has no shortage of demand. How will OKC look when every inch of Deep Deuce, Bricktown, Automobile Alley, Midtown, Film Row, etc, are full? Do we have enough people who want to live downtown to fill up those areas?

I think we probably do. I am excited to see how OKC fills in over the next ten or twenty years. But who knows, I may be wrong. Once those new complexes open up, Deep Deuce Apts may find themselves short of tenants.

At which point, were I the owners of the Deep Deuce Apartments, I would put condos in one building up for sale (to start). Because while we may end up with too many rental units, that's not the case with for sale housing.

[gopokes88]

Couple things:

1. I'm accounting for inflation here. If I can rent a 1k-sf apartment for $1500 in 2015 and can rent that same 1k-sf apartment for $1500 in 2020, and inflation has occurred, that unit is cheaper.

2. I don't believe we have a current demand for downtown that is quite as large as some would think. Unless we count Clayco's residential units, which is anything but sure at this point, we haven't had a major announcement of a residential development in over a year, coming on the heels of having major developments announced once every 6 months, there's clearly a bit of reticence by developers who are probably more aware of what's going on with the rental market than are we. Not saying we're maxing out at all, but I think it's pretty clear that the supply side does not have faith in the demand side to continue the pace we were at 2 years ago. And it can't be blamed entirely on Oil, as the last major announcement was Jan. 2014 (700 West) and there were many months in between that announcements could have been made before oil started it's precipitous decline.

Inflation doesn't exclude rent prices that's what your missing. Plus all of you analysis talk about $/sq ft. Which will surely be higher in 10 years.
If inflation is 3% $1500 in 10 years would be in the $2200 range. Why do you think rents wouldn't budge at all in 10years? What planet do you live on, I wanna move there.

[Teo9969]

Inflation doesn't exclude rent prices that's what your missing. Plus all of you analysis talk about $/sq ft. Which will surely be higher in 10 years.
If inflation is 3% $1500 in 10 years would be in the $2200 range. Why do you think rents wouldn't budge at all in 10years? What planet do you live on, I wanna move there.

You are missing the point entirely.

Right now, we have a downtown price-point that ranges from $.80/sf (Aberdeen) to $2.10 (according to Pete above)

Assuming 3% inflation, in 10 years those ranges would be from $1.08 to $2.82. What I'm telling you is that in 10 years those ranges will be closer to $.95/sf to $4.50/sf. Deep Deuce Apartments are renting right now for between like $1.25 and $1.75 I believe. Yes those rents will rise with inflation, but once the market reaches a greater equilibrium (which means all current projects + a high-rise project + a few more unannounced projects of varying sizes + some turnover in the for sale market and some subsequent owner-rentals) those projects will be outpaced by inflation over time while other, newer projects increase the average rents until we hit a saturation point where the quality of the complex and the area determine the price.

I do not know the exact timeline. I think something like 5-10 years to reach equilibrium and 10 to 25 years to reach saturation.

[Just the facts]

For what it is worth, 10% to 15% of most new downtown housing is priced below market rate and is considered "worker housing". You won't see these prices reflected anywhere, you have to ask for it. Also, this is not Section 8 housing lest anyone starts freaking out.

I think the Steelyard is going to have 28 'worker housing' units available.

[shawnw]

Plus there's the Regency where you can have a non-balcony studio for <$700/mo. Saw a girl wearing a Louie's shirt on the elevator this morning looking like she was heading to work. Perhaps not ideal for some, but it works. I know I've seen ACM students in the building as well.