A lot of press releases cross my desk each day. Too many to write something about on each. But sometimes you'll get one where a sentence jumps out at you. That was the case with a release I received recently from Integra Realty Resources, which just released its mid-year report on Charlotte's commercial real estate market.
In discussing the apartment market, Integra says to expect "significant growth" to continue this year, but it will start slowing down at the end of 2014. The company "suspects it to flatten in 2015-2016 and start declining into the hypersupply market cycle," according to the release.
What would that mean for renters? Integra explains:
"It appears it will be a challenge for the Charlotte market to provide the necessary demand to absorb the amount of supply that has been added to the market. Because of the oversupply, vacancy rates will likely increase over the next few years, which in turn will keep rent growth most likely flat."
So, if Integra is correct, we could expect to see a lot more rent discounts and deals of the "one-month-free-with-one-year-lease" variety. Or, if the apartment developers are right, population growth among young single workers will keep spiraling upward so quickly that it will absorb the record-breaking pace of apartment-building we've been on.
Either way, time will tell. What do you think?
Tuesday, July 29, 2014
The coming apartment bust?
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9 comments:
Bust will happen sooner rather than later----------
worse is when these apartment complexes that are selling for well beyond market square footage age out and become maintenance nightmares and eye sores.
most aren't at all built to last and by selling for such ridiculous prices, new ownership will not be able to afford to remodel them with falling rent prices.
still not sure why anyone would want to live in a place where you can hear your neighbors tv clearly at any hour. better construction and you can't hear anything.
had to cut the corners in order to look good?
The larger number of "haves" who make far more than they are really worth straight from college, far outnumber the "have nots". The price of a decent apartment will not go down because those with more disposable income will only increase as companies move into Charlotte.
that defies logic of statistics in the united states: "the haves outnumber the have nots"
it's uneducated consumption is what it is. no different than buying iphones or ipods over the years when they've been inferior products to competition but marketed better. lot of apartment seekers falling for marketing.
dynamic pricing for residential leasing is insanely unethical from a national economic perspective.
Much the way many condo complexes converted to apartments when the deep recession hit, I wonder if some of these apartment complexes will adapt to condos.
@3:18
that is exactly what will happen.
Getting funding to build new condo projects is virtually impossible these days, so instead, developers build apartments.
Once the initial loan for the building is paid off, you can convert them to apartments, update the units and put them back on the market and make a huge profit.
Fat City Lofts in NoDa has just done this. They were supposed to be condos, but converted to apartments. Now that the supply of condos in Charlotte is extremely low, they've converted them back to condos and put them on the market.
Many of the projects in SouthEnd will do the same in time.
I agree with two of the above comments that there will be a conversion of rentals to condos with a caveat. It is the natural cycle.
The caveat is that not all of this construction will merit ownership. Many of the South End construction units (including the highest priced ones) in particular are built with horrific floor plans that scream young-rental-market-only. They barely offer a dining area, let alone dining room, have small closets, and do not provide room for families. This is all understandable for the rental market where people by nature are transient, but what is the rationale for a condo?
Overall while it may not be a good thing for developers and apartment managers, I do think the slow down (unlikely to be a bust) is a good thing for Charlotte. Many friends I know have found rents listed in both new construction and older apartment complexes (that suddenly all seem to deem themselves "luxury" for questionable rationale) are scaling higher than what this market and region should be demanding.
No one I know is leaving Charlotte because of that (though they may be leaving the Center City/South End area) but Charlotte needs to reasonably affordable if it wants to continue to attract and retain that population we so envy in places like Austin, the Triangle, San Francisco, and other tech hubs. That or have the Chamber do a better job of getting us more tech companies to provide salaries to afford it all.
Pretty good post, 4:55. I agree with much of it.
But Charlotte's prices to rent are nowhere near and never will be near San Francisco's-thank goodness.
Median rent for a 2-bed in San Francisco is currently just shy of 4000/month and there may actually be a bit of softening-many people are fleeing to Oakland and the East Bay.
Median rent in Charlotte for a 2-bedroom is just above $900/month.
@5:21
You are correct regarding SF prices being astronomical compared to Charlotte, but then again so are their job offerings and center city/downtown amenities (shopping, mass transit, entertainment, dining, etc.).
Just to clarify my mention of the other cities was not to say we were in the same league, but only to list those sites that our own Chamber mentions as places to emulate.
Let's hope that includes everything including the job offerings and developed 24/7 downtown that mandates such prices for condos and rentals.
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