June 13, 2018

Demand Failed To Keep Up With Frenzied Development

A report from CNBC. “Rent prices have risen over the past year across the U.S., but there are some bright spots: Several cities experienced modest price drops thanks to new building projects. Of the 25 biggest cities in the U.S., Apartment List found seven — Baltimore, Chicago, Pittsburgh, Portland, Seattle, St. Louis and Washington, D.C. — where median rental rates actually decreased year over year. The price drops in Portland, Oregon, and Seattle are due, in large part, to the flood of new apartments hitting the market, says Chris Salviati, a housing economist at Apartment List. ‘Over the past year, they’ve had a record number of units hit the market,’ Salviati says.”

From Globest.com. “US multifamily rent growth waned in the beginning of 2018. According to research from Rent Café, apartment rents increased 2% in the start of the year, the weakest growth for the same period of time since 2010. Overall, cities with the largest apartment units saw the most rent growth, including Las Vegas, Orlando, Denver and Los Angeles. Nadia Balint of Rent Café: ‘Following several consecutive years of record deliveries, apartment supply is expected to hit a new peak this year, with tens of thousands of new units to be delivered in many of the nation’s primary rental markets such as New York, Washington DC, Los Angeles, Chicago, Austin, and others, slowing down overall growth. Slow-growing wages and lots of new units, most at the high end of the market, chasing after the same renters is inevitably affecting rent prices.’”

From the Newbury Port News. “Tom Saab, owner of Tom Saab Real Estate, has been in the business in Salisbury for more 40 years. He said 15 percent of his 80 summer rental units have yet to be booked. ‘I’m getting calls from other owners who have vacancies also,’ Saab said. ‘Everybody is behind. Last year, I was 100 percent booked.’”

“Saab added that a traditional two-bedroom summer rental is Salisbury usually goes for $1,000 to $1,500 a week but this season could very well end up producing quite a bit of savings for the average renter. ‘You might be able to get a little bit of a discount now because of the vacancies,’ Saab said. ‘We just need to get the message out – Salisbury Beach is open for business and there are vacancies all over the beach.’”

The Charlotte Observer in North Carolina. “A spa for your dog. Golf and boxing simulators in the gym. Private bars with wine storage for residents. A 24-hour concierge. The list of amenities in some new Charlotte apartment buildings sounds more like what you’d expect in a high-end resort than a rental unit where you might live for a year or two. But with a record number of high-end apartments under construction, buildings are turning to their amenities to stand out and try to lure renters.”

“‘It’s been an arms race, especially with the high level of supply and competition,’ said Chad Hagler, a developer with Woodfield Investments, who’s opening the 455-unit Links Rea Farms apartments this year. ‘Everyone is trying to outdo one another.’”

“Not all residents want the amenities, however. ‘I prefer no amenities. My fiance and I toured probably every apartment complex in South End and South Park, and they upcharge for rent,’ said Rob Brooks, a resident of Park Avenue Condos. The couple decided to rent a unit at the condos to avoid the higher price tag of amenity-laden apartments. While his condo has a swimming pool, Brooks said he doesn’t use it much. His membership at the Y makes a swanky fitness room unnecessary, and his lack of a pet eliminates the need for a dog park or pet spa. ‘We didn’t want any of that extra stuff,’ Brooks said. ‘It’s not important to us.’”

From Metro.us in New York. “To get accurate prices of how much it costs to live near a certain stop, RentHop looked at 50 non-duplicate listings within 0.6 miles of a subway stop and calculated the median rents. And luckily, lots of these listings got cheaper. Around half of apartments near subway stops in Manhattan saw negative rent growth, the report found — including 34 St-Herald Square, which serves the B/D/F/M/N/Q/R/W trains, which saw a rent decrease of 8.2 percent, and Chambers Street, which serves the 1/2/3 trains, which saw a rent drop of 10.2 percent.”

“Apartments are also getting cheaper around subway stops in Brooklyn, especially the ones along the L line, which is slated to shut down in April 2019, though some near the Metropolitan Av – G Train stop and the Central Av – M Train stop saw price dips, as well. ‘Our findings indicate that we are now in a renter’s market — net effective rents are dropping, specifically in Brooklyn and Northern Queens. This means that more landlords are offering concessions, and that is a good sign for New Yorkers,’ said Shane Lee, RentHop data analyst. ‘Many renters are getting one month or two months free, and the fact that there is more supply than demand definitely gives renters more negotiating power.’”

From Realtor.com on Florida. “Homebuyers are likely to absorb Miami’s abundance of unsold condos within the next two years, as developers hesitate to break ground on new projects, according to predictions from developer and consultant ISG World. Over the past two years, demand for newly built condominiums failed to keep up with frenzied development in the South Florida city, so much so that multiple developers have put previously announced projects on hold.”

“The softness has pushed many developers in recent years toward rental developments. For example 25 Edgewater, a development under construction in Downtown Miami, was originally offered as a condo tower, but has changed course and is now a rental, according to ISG. Some of the softest neighborhoods include the city’s beaches, such as South Beach, Miami Beach and Sunny Isles, where developers have canceled three major condo projects. About one-fifth of all condo units in the beach areas that have hit the market since 2011 are still unsold, according to ISG.”

“Along the stretch of Miami east of Interstate-95, there are around 3,290 unsold units in new, under construction and pre-construction developments. Analysts have pinned the slowdown on myriad political and economic factors outside of the oversupply, including a slowdown in demand from Latin American buyers. ‘The strength of the U.S. dollar against most foreign currencies and the changing political climate in South America and Europe have recently slowed the investment of foreign capital in United States real estate,’ according to the report.”

The Star Tribune in Texas. “Examples of lavish apartments are everywhere in Fort Worth. The main reason is that when apartment developers borrow money to build their projects, the banks or investors want to get the best return possible per square foot — and that’s easier to do when you’re renting to tenants with a six-figure salary. ‘Developers are searching for the highest rate of return, so they’re going to be choosing projects that earn that money, particularly in an area with a limited availability of land and a tight construction labor market,’ said Gus Faucher, chief economist at PNC Financial Services Group.”

“Since 2010, 16,460 apartment units have been built in the Fort Worth area, according to RealPage, a real estate data company. But only 4 percent of these new units — a lowly 710 apartments — are now priced below the area’s average rent price of $1,093 per month. As more luxury apartments are built, the older units tend to become a better deal. Once the new apartments are open, older competitors will offer prospective residents a month of free rent, a break on utilities and other perks to lure them in. ‘They’re older and don’t have amenities, but they are more reasonably priced,’ Faucher said.”

From KBTX-TV in Texas. “According to a recent report by Bloomberg, this past school year, Park West, a new luxury-styled apartment complex located off of George Bush Drive, had nearly half of their available apartments still up for rent. Reasons behind the vacancy seem to point to cost. At the beginning of the year, rent prices were as high as $1,000 a month, which students like Tayler Winchell think is too high. ‘I mean, I couldn’t pay for it, as a college student you are paying for your own things and school, it’s just not possible unless your parents are doing it for you,’ said Winchell.”

“Even with amenities like a rooftop pool, a fitness and activity center and a nice view, Winchell said she doesn’t blame others from turning away. ‘Yes, I would love to have a nicer apartment and the amenities that they offered, but at the price it’s just not realistic,’ said Winchell.”

“Parents like Kenia Navarro said that she would never pay more than $600 for her kids to go to stay while they were in college. ‘I remember growing up and my parents paying 700 or 800 for a three bedroom house and now a one bedroom goes for $1,000, that’s just crazy, and that’s just for rent, that’s not including utilities, groceries or anything, it’s ridiculous,’ said Navarro.”

“To help fill the empty rooms, Park West lowered their rates to as low as $600. ‘You don’t realize until it’s coming out of your own pocket and then you’re like wow okay let’s be realistic and that is just not realistic,’ said Navarro.”