With low interest rates, oversupply, high unemployment rates and low land availability, many multifamily developers have had a difficult time developing product in the West over the past couple of years. Yet, some companies, such as Lewis Apartment Communities, AvalonBay Communities and Pacific Properties, have remained successful and currently have several new projects underway. Western Real Estate Business spoke with these companies to see how they are faring and what their outlook is on the future of multifamily developments in the West.

Lewis Apartment Communities

Lewis Apartment Communities’ Homecoming concept features two- and three-story townhomes.

In the West, the for-sale housing market is one of the biggest competitors of multifamily developers. With low interest rates, many people are choosing to buy homes rather than rent. Even the for-sale condo market has taken off, becoming a direct threat to apartment developers. “Now, because house prices have gone up so much in California, the condo and the [single-family] home markets are red-hot, and consequently, those for-sale developers are bidding more [than multifamily developers] for a piece of property,” says Randall Lewis, principal and executive vice president of Lewis Apartment Communities. This has made developing apartments difficult, but Upland, California-based Lewis Apartment Communities has adapted its strategy accordingly, by offering amenities that are normally associated with for-sale communities.

“People are looking for things that make their home feel like a home, as opposed to an apartment,” says Lewis. Executives at Lewis Apartment Communities also know that one way to make an apartment feel like a home is to foster a sense of community. “We are meeting their needs in regards to shelter, but we also want to meet their social, business, recreation and family needs,” explains Lewis.

Lewis Apartment Communities’ ‘Homecoming’ concept was created to fulfill renters’ desires for a community feel. The Homecoming is a new multifamily product that the company is building in Riverside County, Rancho Cucamonga, Loma Linda, Chino, Fairfield and Sacramento, California, and in Reno, Nevada. With these communities, Lewis plans to bring more than 4,500 for-rent townhomes and villas to the West over the next 3 years. These communities differ from existing product with unique features, such as the layout of the units. The units range from one-bedroom villas with detached single-car garages to three-bedroom townhomes with direct access to two-car garages. “We feature a lot of two- and three-story townhomes, where no one has to live above or below anybody,” says Lewis. “We have had a strong market response to that.”

One of the most important goals of the Lewis Companies is to give these projects the feel of a neighborhood. A 14,000-square-foot clubhouse serves each development as the social center of the community. The clubhouses each feature a gym, therapy/wellness center, theater with projection television, community room with kitchen, game rooms, hobby and crafts rooms, players club with card and pool tables, library, cyber café and 24-hour business center. A lifestyle director is also employed at each community. Each development also features a resort-style junior Olympic pool and spa, children’s play park and water park, sport court, tennis court, walking and jogging trails, and outdoor entertainment areas with gazebo and barbecues.

In the future, Lewis plans to continue building quality communities, adding to the more than 7,000 multifamily homes that the company has developed in California and Nevada. “One of our goals is to be recognized as a premier regional player,” says Lewis. “We have no aspirations of being a national apartment developer, but within our marketplace, we hope to continue to build our brand, so that we have a strong name identity among tenants and employees,” says Lewis.

AvalonBay Communities

AvalonBay’s Avalon at Mission Bay is an $80 million project in San Francisco.

Alexandria, Virginia-based AvalonBay Communities develops and redevelops luxury apartment communities in the high barrier-to-entry suburban and urban infill markets of the United States, including the Pacific Northwest and Northern and Southern California. The company has been able to establish a strong market presence; its portfolio currently consists of 142 apartment communities with 42,147 units in 10 states and the District of Columbia.

AvalonBay has faced challenges, as most developers have, in the Western market. “Continued supply [and] low mortgage interest rates have impacted the economic performance of all rental communities,” says Steve Wilson, regional vice president of AvalonBay Communities. However, he adds, “as supply abates and interest rates edge higher — combined with material job growth — the economic occupancies will improve.”

Looking at future trends, AvalonBay is developing several new projects, including the $80 million Avalon at Mission Bay in San Francisco. The 250 units in the development feature wood floors, granite counters and views of the bay and skyline. The complex also has a fitness center; penthouse lounge with outdoor seating, large screen television, full kitchen, billiards and an executive conference room; controlled access systems; and easy access to mass transportation such as MUNI, Cal Train and highways 280, 101 and 80.

Another AvalonBay community, the $51 million Avalon at Cahill Park, is located in San Jose. The 218-unit development consists of both townhomes and lofts, along with 7,000 square feet of retail space and underground parking. The community also offers easy access to mass transportation, including Cal Train and the future Light Rail system. It is also within walking distance of retail, entertainment and restaurant destinations.

Looking to expand its presence in the West, AvalonBay currently holds future development rights for 41 communities. The company follows a strategy of ‘right place, right time,’ focusing on markets with solid and growing economies. Although the company continues to develop out West, it is cautious when approaching new markets. “2004 will continue to be challenging in the Seattle and Bay area,” says Wilson. “Until we see meaningful job growth, occupancies and rental growth will be under continued pressure there.”

Pacific Properties

The Hampden is a 291-unit luxury apartment community being developed by Pacific Properties in Denver.

Las Vegas-based Pacific Properties has developed more than 20,000 multifamily units in California, Colorado, Arizona, Nevada and Texas. Currently, the company is focused on adaptive re-use projects, luxury apartments and urban infill projects.

When developing projects, Pacific Properties aims to attract those who rent by choice. By appealing to a certain group, Pacific Properties is able to more accurately pinpoint tenants’ wants and needs. “[Renters-by-choice] like the advantage of having all of the services and none of the traditional homeowner responsibilities,” says Steve Molasky, CEO of Pacific Properties. The company tries to offer amenities that fit this type of tenant’s lifestyle, such as easy access to transportation and other conveniences, such as retail, restaurants and recreation. The Hampden, a $45 million luxury apartment community in Denver, is designed to appeal to the renter-by-choice. The Hampden will feature 291 units in a four-story urban village, near the Southmoor Light Rail Station. The community will feature garden apartments, ground-floor live/work units and lofts. The units will feature modern kitchens, nine-foot ceilings, walk-in closets, fireplaces and well-appointed baths. The community will contain a fitness center, clubroom, pool, spa and business center, and it is also close to many amenities, including a movie theater, grocery store, retailers and restaurants.

Another development the company is currently working on is di Renzo, a 158-unit luxury complex in Riverside, California. The $20 million project is an adaptive re-use of a former shopping center site in Sycamore Canyon, a community in Riverside. The company worked closely with residents and the city to rezone the area and also contributed $300,000 toward the first phase of a 20-acre city park. “This solution allowed the community to begin building a park 5 years earlier than planned,” says Molasky.

The apartment community will include seven two-story buildings in a contemporary Spanish style, with a fitness center, courtyards, play areas and a business center. The units themselves will feature high ceilings, full-size washer and dryer, patios and oversized bathtubs. Pacific Properties believes these projects will be successful because the areas in which they develop have strong base markets and the residents of these areas enjoy their lifestyles. “In general, we feel very strongly that all of the markets we are in have really strong dynamics,” says Molasky. Pacific Properties is also able to ride the ups and downs of the economy because of its ability to adapt to changes in the market. “We pride ourselves on the fact that we are small enough to be able to respond quickly,” says Molasky.

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