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Multifamily Trends To Watch In The Coming Year

A Multitude of Factors Will Generate Rise in Operating Costs

August 25, 2014

While the future looks bright for the multifamily industry, a multitude of factors will generate a rise in operating costs for apartment community owners in the coming year. According to Pete Smith, executive vice president of Sunrise Management, when examining expense reports, owners should be aware of the following trends:

    Minimum wage increases. Both state and local mandated minimum wage increases will result in higher payroll costs and vendor costs in 2015. This will be felt most in the landscaping, cleaning and painting sectors where many workers are at minimum wage levels. Plumbing, electrical and higher skilled vendors will be less impacted by this.

    Workers’ comp premiums. These are on the rise again, and we are seeing 10 to 30 percent increases in the coming year from all carriers. This will impact both our vendors and our site payroll costs dramatically.

    Property insurance. After many years of lower rates and stability, insurers are pushing rates up by to 10 to 20 percent upon renewal. Properties with losses are being hit particularly hard, so consideration should be given to looking at raising deductibles and self-insuring up to those levels.

    New Department of Energy efficiency standards. These go into effect in September 2014, and all manufacturers will be increasing cost of refrigerators by between five and 20 percent to meet these standards. Supply of the prior models will be available for 60 to 90 days after this September date, so some consideration should be given to stocking up before the new regulations go into effect.

About Sunrise Management

Founded in 1978, Sunrise Management is a privately owned San Diego-based firm specializing in the management of residential real estate projects. The firm currently has regional offices in Sacramento, Las Vegas and Phoenix, with a portfolio of 187 properties and 11,000 units throughout California and the southwest. For more information, visit www.sunrisemgmt.com

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