As apartment complexes continue sprouting up all across the country, some developers are holding back from building and putting their projects on hold.
Bloomberg News reports apartment developers are starting to tread more carefully as cracks appear in the five-year-old boom that sent rents soaring to records across the U.S. Construction concentrated in fast-growing urban markets has left cities from New York to Denver and San Francisco with a surplus of high-end units. Rent growth has already tapered off in some areas, and lenders are getting more selective about the projects they fund.
Baton Rouge could join that list soon as several high-end projects are all under development in the Capital City. Some real estate experts are worried the city is becoming overbuilt, leaving vacancies rising and lease rates falling.
Builders went upscale to preserve profits squeezed by rising land and labor costs. Now they’ll need to work harder to find renters willing to pay a premium for trendy locations and frills such as rooftop pools and fire pits. About 30% of the apartment units under construction are in cities, compared with 15% in the previous decade, according to multifamily data firm MPF Research.
“Everybody fell in love with these markets and wanted to build—but you can’t build forever. It doesn’t work that way,” says Ryan Severino, chief economist at research firm Reis Inc. “The apartment market is losing steam.”
The second quarter was the fifth straight in which construction exceeded net gains in occupancy, according to a report Reis issued late Tuesday. With almost 200,000 units completed over the past 12 months, “2016 is set to challenge records for construction figures, if not break them,” the firm says.
Bloomberg has the full story.
