A Wave Of High-End Units, Creating A Glut
A report from the San Francisco Business Times in California. “In 2016, around 5,000 units were completed in San Francisco, the highest level in decades. Will prices keep dropping? With supply on the rise, rents in San Francisco fell 2.1 percent in the past year, down to $3,390 per month for a one-bedroom, according to ApartmentList. That’s still the highest in the country, but a significant slowdown compared to the double-digit price growth of the past few years. The outlook for 2017 is uncertain: The city could see a continued cooldown, a major downturn or a rebound. What happens will affect billions of dollars in housing investment going forward.”
The Chicago Tribune in Illinois. “After experiencing a painful surge in rents during the last six years, Chicago tenants finally are getting a break. Rents have dropped in areas of downtown where there has been massive new construction of luxury high-rise apartment buildings, and rents are rising only modestly throughout the metropolitan area, according to Axiometrics. The trend in the Chicago area follows the same pattern as the rest of the nation. After years of record-setting new apartment construction, rents have begun to moderate. But Chicago’s slowdown is more pronounced.”
“Axiometrics analysts attributed the weaker rental market in Chicago to slow job growth, which is suppressing apartment demand at a time when new construction has produced a huge supply of rental units. n a report after the third quarter, Chicago-based Appraisal Research Counselors said the number of rental units in Chicago’s downtown had increased 150 percent since mid-2005. There were 6,880 units under construction downtown this fall. In 2015 and 2016, about 3,500 new units have become available each year, about double the annual average over the last 24 years.”
From Michigan Live. “Plans for a new 12-story student apartment high-rise on South U are headed to the Ann Arbor City Council for approval. The project includes 19 four-bedroom units, 17 five-bedroom units and 7 six-bedroom units geared toward U-M students. The apartments are expected to be priced from $5,500 to $8,000 per unit, according to plans. The four-bed units range in size from 1,334 to 1,581 square feet, while the five-bed units go from 1,503 to 1,898, and the six-bed units are 2,147 square feet.”
“Commissioner Alex Milshteyn raised the question of housing supply and demand, asking the developer to comment on whether there might be an oversupply of this type of housing geared toward students. Sean Havera, a representative for the development, said the development team looked closely at that and that’s why there aren’t one- and two-bedroom units, which are less in demand and the last to be rented in student housing developments. ‘There’s still a very big availability of those,’ he said.”
The Houston Chronicle in Texas. “A recent national report found further evidence of Houston’s apartment glut. Real Page, Carrollton, TX-based technology firm, found that Houston’s high-rise apartment rents declined the most out of the 50 largest U.S. markets surveyed. Houston saw a 7.1 percent decrease in high-rise apartment rents, the steepest nationally. A wave of high-end units are coming to the market, as job growth slows and weakens, creating a glut.”
“San Francisco, one the most expensive markets in the country, also saw a drop in rent prices with a 6.2 percent drop annually. The firm suggested that the pricing in the Bay Area may have been inflated in recent years. The average rent is still $3,400 a month, despite the drop in prices.”
