July 27, 2017

If They’re Building More, There’s A Need

A report from the Aurora Sentinel in Colorado. “Tales of distraught would-be homeowners unable to snatch a dream home in Colorado’s scorching-hot housing market are more common these days than a weed shop on Colfax. Renters in metro Denver feel that pinch just as acutely. But, experts say, there has been some relief as landlords dish out a variety of discounts aimed at blunting those ever-rising rents and luring savvy renters always looking for a deal. Teo Nicolais, a real estate instructor at the Harvard Extension School and volunteer at the apartment association, said the bulk of those concessions come in the form of a free month of rent spread over the course of a lease. And the concessions aren’t limited to a free month, Nicolais said. Some landlords have offered free parking passes or discounts on pet deposit fees.”

“Last year saw a record number of new apartments built across the metro, he said, and 2017 is on pace to smash that record by more than 25 percent. That means lots of inventory out there and landlords eager to fill brand-new buildings that are usually empty the moment construction wraps. ‘If the property down the street from you is offering one month’s free rent, you need to offer it too,’ he said.”

From Curbed San Francisco in California. “San Francisco is building more, everybody agrees on that. But how much is more—and for that matter, how much is enough? The apartment rental site RENTCafe tapped research firm Yardi Matrix to take stock of the city’s new housing stock last week. And the numbers look superficially good: The Bay Area as a whole should yield 5,415 new apartments by the end of this year, with 1,860 in San Francisco itself.”

“The catch is, Yardi Matrix says that rate of construction is down 12 percent year over year. And in San Francisco it’s down 48 percent. Last year the Bay Area-wide product came to almost 6,200, which RENTCafe credits with putting the skids on space shuttle-velocity rent increases. ‘While demand is still strong in the city, this flood of new rentals [put] a damper on incessant rent growth,’ RENTCafe’s Ama Otet writes.”

From My San Antonio in Texas. “A real estate firm from Chicago purchased the $42 million Axis at the Rim luxury apartment complex last week. Sherman Residential bought the 10.5-acre, 308-unit complex from Trinsic Residential Group of Dallas, which finished building it about six months ago, said Scott Gould, Sherman’s senior vice president. Despite the apartment complexes being built around The Rim, Gould said he thinks the area will soon be built out — in other words, there isn’t a risk that droves of new apartments will flood the market and drive rents down.”

“‘We think the long-term prognosis is very strong for the area,’ he said. Real estate investors have purchased roughly 40 apartment complexes in Bexar County since the beginning of the year, property records show.”

The Real Deal on Florida. “The Boca Raton Planning and Zoning Board approved a plan for an upscale, 193-unit assisted living facility to be developed by Penn-Florida Companies in downtown Boca Raton. Developers are increasingly turning from condo development to apartments, amid slumping condo sales, which could eventually lead to a glut of rentals, experts say.”

“Jack McCabe, CEO, McCabe Research & Consulting in Deerfield Beach, said about 10,500 apartment units have been completed in South Florida in the last 18 months, and another 18,000 apartments are scheduled to be delivered during the next two years. Early this year, a Miami Downtown Development Authority report showed that Greater Downtown Miami will see more rental apartments delivered than condominiums in 2017 for the first time ever.”

From WDAZ on North Dakota. “More apartment complexes going up in Grand Forks. While some existing buildings remain almost completely vacant. Calsey Langston, ‘A quick google search comes up with fifty apartment complexes or property management companies in Grand Forks, but check this out, apartments.com shows 590 apartments available in our city and there’s about to be even more.’ A property manager from an older company wouldn’t go on camera, but he tells me, in one of their buildings, they have six vacant units. In another complex, twenty-eight units are sitting empty.”

“According to the Grand Forks city website, vacancy in town is at more than eight percent. This spring, one-bedroom apartments had the highest vacancy rate in five years. For two-bedroom apartments it’s a six-year high. But there are five more approved apartment buildings awaiting construction. ‘There is still a need for more housing like a lot of our buildings are absolutely full so I suppose if they’re building more, there’s a need for more apartments,’ says Garett Sondrol, Oxford Realty.”

“It’s still in question whether or not the demand will keep up with the over-supply.”

From Bloomberg on New York. “A pair of high-rise apartment towers is set to replace a decrepit parking deck in New Rochelle, extending the New York suburb’s effort to draw younger residents. In the past six years, developers have built or proposed 50 Westchester County residential projects within half a mile of a Metro-North station, to add 11,231 apartments.”

“Whether there’s demand for additional workspace may be questionable in a county where the office-availability rate has hovered close to 25 percent, about twice that of Manhattan, says brokerage Newmark Knight Frank. Even in the apartment market, Westchester is edging toward being overbuilt, with more than 1,000 rentals in the county’s pipeline for this year, according to Barbara Denham, senior economist at research firm Reis Inc. Vacancies are projected to rise to 4.4 percent this year, from 2.9 percent in mid-2016, Reis data show. ‘I think the market can absorb these units, but not 100 percent,’ Denham said.”

From Bisnow on New York. “A critical mass of new apartment buildings is opening in New York City, and developers are conceding more and more to renters in an effort to lease them up. Concessions — the industry term for free rent — by building owners were the second-highest on record, and nearly triple that of a year ago. At the same time, the inventory expanded for the 22nd month in a row. Renters are aware developers are scrambling, so the number of people shopping for discounts is increasing.”

“A new Yardi Matrix report found that New York has 26,739 units under construction, 7.8% of all housing units coming in the entire U.S. But developers can’t build these apartments fast enough, at the right price points, to make them affordable for all New Yorkers. In 2018, Citi Habitats says Manhattan will gain 4,442 apartments and Brooklyn an astonishing 10,581 as developers rushed to meet the demand of 2015 and 2016. By 2019, the number of units levels off to 3,425 in Manhattan and 6,791 in Brooklyn.”

“There are also more condominiums opening, and some of those will have investor units that will also compete in the rental space. That is why the competition is fierce to get the prospects to sign those leases. Citi Habitats President Gary Malin said owners can draw the line on the rental number and get 25 apartments leased, or give up some concessions and get 50 apartments occupied in the same period to start bringing in the rent money. ‘With a new building, you want to lease up as fast as you can,’ Malin says. ‘The market changes very quickly.’”

“The problem for investors, developers and the one-off owner: There are simply too many apartments on the market to keep prices soaring, and more are coming.”