Hand-Wringing About A Housing Glut
A report from Money Watch. “If you want to rent an apartment in one of those high-rise buildings going up in major cities nationwide but can’t find one in your price range, this could be your lucky day — or even your lucky year. Rents may slowly be spiraling downward by as much as 20 percent. Jay Rollins, the head of real estate investing firm JCR Capital, is predicting that the booming urban rental market in places such as Denver, New York City and San Francisco may have finally become overbuilt and overbought. ‘A lot of new buildings have come on-line,’ said Rollins. ‘There’s too much, and prices are getting too high.’”
“Rollins’ firm provides financing for acquisitions in the rental and condo markets with both debt and equity. He describes his mini-investment bank as ‘opportunistic.’ Rollins also looks for those who want to take over buildings whose original owners end up over their heads in debt and are forced to sell to someone who would ‘buy it for a dollar in order to make two.’ Simply put: high-end ‘flippers.’”
The Oregonian. “Rent increases have slowed across the metro area and have even fallen in some areas, according to the apartment industry association Multifamily NW. The report comes as new construction has flooded the metro area, giving renters at the top end of the market plenty of options to which to choose. Newly constructed apartment buildings are offering more move-in bonuses, and their established high-end competitors are doing the same.”
“The report said rents fell 6 percent in Hillsboro and 4 percent in both Northwest Portland and Beaverton.”
From NPR Pittsburg. “The demand for new apartments in Philadelphia and Pittsburgh has grown swiftly over the last few years. Developers have met that demand with a tremendous amount of construction, said Barbara Byrne Denham, senior economist at Reis, a real estate data and analytics company based in New York. It might seem like both cities have more new luxury apartments than they know what to do with. But is hand-wringing about a housing glut a wise reaction? ‘Yes and no,’ said Byrne Denham.”
“The vacancy rate in Pittsburgh rose from 4.7 to 5.2 percent in the same period. ‘While that looks striking, it’s not alarming,’ said Bryne Denham, noting that new construction in Pittsburgh for 2017 is expected to drop by almost a third, to roughly 1,000 units. ‘So we do see a lot of supply, but it’s not such an alarming rate that we’re going to see empty, empty buildings.’”
The Buffalo News in New York. “Grand Island Supervisor Nathan D. McMurray wants the town to put a moratorium on the development of any new apartment complexes until it has a master plan in place. Oakwood Ridge, a $1.2 million apartment complex at 2984 Grand Island Blvd., with two buildings, each with eight apartments, a total of 16-units, raised an outcry on social media – led by McMurray, who said ‘there’s an absolute oversaturation of high-end apartments on Grand Island.’”
“Oakwood Ridge Developer David Mazur, who also built a similar development, the 32-unit Nottingham Estates two years ago, told The Buffalo News that he abided by all the rules of zoning and even designed his new complex at half the density that he was allowed. He said another apartment complex, Heron Pointe, a 230-unit project on Grand Island Boulevard that is under construction, is what started the issue with oversaturation, not his complex. ‘I do believe if that project didn’t exist they wouldn’t be worried about my 16 units,’ said Mazur.”
The Houston Chronicle in Texas. “Modern apartment buildings have to offer more than cable TV to draw the interest of prospective renters, so developers and designers are working hard to keep pace with the rapid lifestyle changes ushered in by digital technology. Tasked with identifying amenities that could differentiate apartment buildings in this age, a group of graduate students from the University of Houston’s Stanford Alexander Center for Excellence in Real Estate investigated emerging examples and drew up a list of best practices.”
“Developers were keen to pay attention. With a glut in luxury high-rise apartments, competition for residents is heating up and amenities could give innovative landlords an advantage. Workout rooms and swimming pools don’t drive as much renter excitement anymore. So what’s next? According to the students: fingerprint-scan door locks, dedicated facilities for package delivery, building-specific smartphone applications, internet-connected appliances, transportation services and facilities for pets.”
The Journal Sentinel in Wisconsin. “A high-end lakefront apartment development planned for St. Francis has received preliminary city approval after the number of units was substantially reduced. Bear Development LLC now plans to develop 11 two- to three-story buildings, totaling 221 apartments, with enclosed parking. The $30 million project would include three additional buildings with garages, as well as a clubhouse with an outdoor swimming pool.”
“Kenosha-based Bear reduced the unit count after seeing a decline in rent among similar developments in the Milwaukee area because of an oversupply of new apartments, according to city officials. Similar concerns have led to other Milwaukee-area apartment developments being downsized, delayed or canceled. Any city financing help would be provided through new property tax revenue generated by the project. The development’s monthly rents would start at $900, according to city records.”
The Capital Journal in South Dakota. “Two apartment complex owners - Mike and Donna Jean Newton, and Glennis and Mark Zarecky - asked the Hughes County consolidated equalization board for lower tax bills on large apartment buildings. Each got some relief. Mike Newton did not appear before the board, but sent a note: ‘When we built, the city was crying for places for people to live. Now not many people are moving to Pierre. It is difficult to pay these kinds of taxes when you can’t keep apartments full.’”
“Prairie Vista, near Northridge Mall, has one-bedroom and two-bedroom units, billed as luxury apartments, from $800 to $1,050 per month. He’s got the building for sale, listed at $1.8 million, but says he would take less.”
“Glennis Zarecky did appear before the equalization board on Monday. As in the Newton’s case, the owners got some tax relief. A quick influx of apartments has changed some of the dynamic, Zarecky said. ‘I think back and we built ours and opened it up in 2013 and there was an absolute demand for quality apartments. But since then, the Fosters built 24 units and Prairie Vista opened a year or so later than we did.’”
“‘Our vacancy rate in 2016 was certainly twice as high as what we had budgeted for,’ she said. Zarecky said she’s not sure what has changed, except perhaps a certain slice of the market has been met. ‘I think when it comes to that grade and budget of apartments, I think the demand has been met,’ Zarecky said. ‘What I believe is still in demand is more affordable ones. There are a lot of people who don’t want two bedrooms, or can’t spend $700, or $800, a month.’”
