If it seems like a lot of apartment complexes are under construction in the Capital Region, it’s because there are. Currently, 14 multifamily developments are in various stages of the construction process. When completed later this year, they’re expected to add more than 2,150 new units to the market—about 300 more than were expected to come online last year at this time.
Can the market absorb that many?
Probably so, according to local real estate experts. But in a market where the post-Katrina absorption rate has been averaging about 900 units per year, more than 2,000 in the space of 10 months is a great deal of inventory.
“We have a substantially greater pipeline than we did 12 months ago,” says appraiser Wesley Moore of Cook, Moore and Associates, who has been crunching the multifamily numbers as he prepares his report for the upcoming Baton Rouge Trends real estate seminar. “We could conceivably have a six-year supply built in a two-year span.”
That’s because in addition to inventory added to the market over the remainder of 2015, more than 3,700 units are expected to be completed in 2016—and that’s not including several major projects that have been announced but not yet gotten off the ground, like the River District on Nicholson Drive or LSU’s mixed-use development near the south gates of the campus.
Several factors are driving the building boom. The local economy is strong, rental and occupancy rates are high and interest rates are low. Banks are in the business of lending, and developers are in the business of developing. All the pieces are in place for a wave of new construction.
Also significant in the equation: Of the 1,700 new units that were supposed to open in 2014, only 50 actually did. The other 1,650 are still under construction—a key reason this year’s numbers are so high.
“We had time to take up some of the slack,” Moore says. “So there is some pent-up demand, and a lot of people are very exuberant about building the next complex.”
There is historical precedent for such building booms. Specifically, in the early 1970s, early 1980s, mid-1990s and mid-2000s, the local multifamily market experienced aggressive growth spurts. It appears to be in the middle of another such cycle now, says Dave Treppendahl, a multifamily specialist with NAI/Latter & Blum.
“You have a burst of activity, then it stops,” he says. “We’re in the middle of a burst.”
Treppendahl and others are optimistic the market is not overbuilding, though he concedes it will be close.
“It seems like a crazy amount,” he says. “But you look around and the complexes are full.”