It Is Quite Possible To Overbuild
A report from Boise Weekly in Idaho. “Currently in Boise it is good to be a landlord, and great to be a developer: There are more than a dozen new or in-development housing units in the downtown core alone. More than 1,300 units have been recently completed or are under construction. JPM owner/manager Don Johnson said he’s reserving judgment on how the influx of new rental units will affect the market, but 1,300 new units is a drop in the bucket compared to how many rentals are currently under construction all across Ada County, many of them outside the Boise city limits. ‘I keep track of a list from the Ada County Assessor’s office. Take a look at this,’ Johnson said as he pulled out a stack of papers. ‘Here we have a list of all the units that are in some form of the process of being built. It’s 5,500.’ He looked up, took a deep breath and repeated, ‘It’s 5,500.’”
From the National Real Estate Investor. “Vacancy rates for rental apartments remain low in the top six U.S. markets, despite an influx of new development, though certain neighborhoods arguably have too many new super-luxury apartments all leasing at the same time. Developers have opened about twice as many new apartments as usual in the top six coastal markets over the past four to five years, according to RealPage. In San Francisco and Seattle, developers have opened a little more than twice the historical average number of apartments.”
“Despite low vacancy rates, property managers have cut down rents in San Francisco and New York in 2016. Many apartment managers now regularly offer concessions of one or more months of free rent to attract renters to new luxury towers in New York—a once unheard-of practice in the city. ‘It’s probably impossible to overbuild New York or San Francisco at large,’ says John Affleck, a research strategist with the CoStar Group. ‘But it is quite possible to overbuild the high-end of the market, and weak rents and rising concessions suggest that developers may have succeeded.’”
The Real Deal on New York. “The Brooklyn rental market continues to weaken, with the borough’s prices falling for the second month in a row. ‘Brooklyn continues to be the weaker of the three boroughs, in the general sense,’ said Jonathan Miller, the CEO of appraisal firm Miller Samuel, and author of the report. ‘Rental inventory keeps coming into the market. It’s the 22nd month in a row of rising inventory.’”
From Dow Jones Newswire. “A handful of startups are betting they can help apartment-building owners convert empty units into hotel rooms, a controversial practice that could help landlords generate more revenue. The services are sprouting up just as the red-hot U.S. apartment market is beginning to cool. In all, there are roughly 29 million apartment units in the U.S., according to the National Multifamily Housing Council. Nearly 800,000 new units have been built since the beginning of 2014, according to CoStar Group Inc.”
“But the vacancy rate for apartments in downtown markets rose to 8.1% in the first quarter from 6.8% a year ago, according to CoStar. Some 45% of buildings completed in the first quarter of 2016 were more than 10% vacant after a year, compared with 38% for those built in the first quarter of 2015, suggesting properties are taking longer to lease. Brian Ferdinand, YouRent’s chief operating officer, said the company is hoping to take advantage of the glut of luxury apartment inventory at the moment and demand for hotel rooms in hip urban cores. The company is expanding in Miami, Austin and Nashville and plans to fan out to San Diego, Denver and Boston.”
The News Press in Florida. “Florida Gulf Coast University is anticipating that the revenue it generates from students living in its housing facilities will drop by more than $1 million in two years. The school estimates the revenues will decline each of the next three school years. There are two reasons, according to the university, for the projected decrease: Competitors building apartments, marketing them to students and luring the students away from FGCU. A decline in first-time college students being admitted.”
“Brian Fisher, director of housing at FGCU, said he wonders if too many apartments are being built. ‘It happens a lot in college markets where things get overbuilt and things struggle thereafter,’ he said. ‘We will have to wait and see if that happens.’”
