WANTED:RENTERS FOR RITZY DOWNTOWN APARTMENTS
By Paul Davidson
USA Today
August 6,2016
Surplus of luxury apartments
Vacancies in luxury apartments outpace availability in lower price and midtier units.
Apartment building owners are struggling to rent many of the luxury units that have flooded downtowns across the country in recent years even a relative shortage of multifamily homes in the suburbs has driven up rents.
Since 2012,the nation's supply of apartments has swelled 16.6% in central business districts and 13.5% in secondary core" areas surrounding the downtowns but just 5,5% for the midpriced suburban units,according to real estate research firm CoStar.
The downtown building frenzy has been well-publicized as developers cater to Millennials,among other age groups,who have streamed into revitalized cities to be closer to amenities, nightlife and a car-free lifestyles-
The CoStar data,however,shows that builders may be putting up too many apartments--most of which area at the high end of the market--in the urban hubs and not enough in the outlying areas.
Over the past four years,the vacancy rate in downtowns and adjacent districts has climbed from 3.4% to about 5.r5%,CoStar figures show.
Although new apartments complexes typically take some time to lease up, many units have been sitting empty longer than normal.
Nationally, new apartments had an average 52% vacancy rate when they opened in the first quarter if 2013,and the rate for those dwellings fell to about 11% within 18 months.
By contrast, new units opening in the first quarter of 2015,and the rate for those dwellings fell to about 11% within 18 months.
By contrast,new units opening in the first quarter if 2015had a 72% vacancy rate that declined to 18% over a similar period. The higher vacancies were driven by luxury buildings in central business districts,CoStar Chief Economist Hans Nordby says.
"Those new flashy,splashy downtown buildings --they have a vacancy problem,"Nordby says. "They are too expensive to rent and there are too many of them. At the same time,he says."There's not much supply of new apartments in the suburbs."
As a result,since 2012, average rents have risen 12.3% in downtowns and 18% for midlevel suburban apartments,CoStar says.
The city-suburb split is playing out in metro areas across the country but it is particularly acute incities such as Los Angeles,Washington DC,and Chicago.In L.A.,about 5,500 apartments have opened downtown the past 3 1/2 years with typical rents of about $6,500 a month and the district's overall vacancy rates climbed from 4.5% to 9.9%,according to CoStar data.
In the suburbs,just 1,900 midtieer ynits have been added since 2012 and vacancy has fallen to 2.8% from3.7%.In suburbs such as Santa Monica,many landlords are requiring minimum credit scores of 700 and are willing to hold apartments with a security deposit for just several days,compared to a typical few weeks,says Jessica Sanders,client relations specialist for Pacific Listings, a website for apartment hunters.
A shift may be underway.
In recent years,more apartment complexes have gone up in the suburbs of cities such as Philadelphia,Washington DC and Charlotte as investors make more financing available,says Stockton Williams,head if the Urban Land Institute's Terwillinger Center for Housing.
"Things are starting to change," he says.
By Paul Davidson
USA Today
August 6,2016
Surplus of luxury apartments
Vacancies in luxury apartments outpace availability in lower price and midtier units.
Apartment building owners are struggling to rent many of the luxury units that have flooded downtowns across the country in recent years even a relative shortage of multifamily homes in the suburbs has driven up rents.
Since 2012,the nation's supply of apartments has swelled 16.6% in central business districts and 13.5% in secondary core" areas surrounding the downtowns but just 5,5% for the midpriced suburban units,according to real estate research firm CoStar.
The downtown building frenzy has been well-publicized as developers cater to Millennials,among other age groups,who have streamed into revitalized cities to be closer to amenities, nightlife and a car-free lifestyles-
The CoStar data,however,shows that builders may be putting up too many apartments--most of which area at the high end of the market--in the urban hubs and not enough in the outlying areas.
Over the past four years,the vacancy rate in downtowns and adjacent districts has climbed from 3.4% to about 5.r5%,CoStar figures show.
Although new apartments complexes typically take some time to lease up, many units have been sitting empty longer than normal.
Nationally, new apartments had an average 52% vacancy rate when they opened in the first quarter if 2013,and the rate for those dwellings fell to about 11% within 18 months.
By contrast, new units opening in the first quarter of 2015,and the rate for those dwellings fell to about 11% within 18 months.
By contrast,new units opening in the first quarter if 2015had a 72% vacancy rate that declined to 18% over a similar period. The higher vacancies were driven by luxury buildings in central business districts,CoStar Chief Economist Hans Nordby says.
"Those new flashy,splashy downtown buildings --they have a vacancy problem,"Nordby says. "They are too expensive to rent and there are too many of them. At the same time,he says."There's not much supply of new apartments in the suburbs."
As a result,since 2012, average rents have risen 12.3% in downtowns and 18% for midlevel suburban apartments,CoStar says.
The city-suburb split is playing out in metro areas across the country but it is particularly acute incities such as Los Angeles,Washington DC,and Chicago.In L.A.,about 5,500 apartments have opened downtown the past 3 1/2 years with typical rents of about $6,500 a month and the district's overall vacancy rates climbed from 4.5% to 9.9%,according to CoStar data.
In the suburbs,just 1,900 midtieer ynits have been added since 2012 and vacancy has fallen to 2.8% from3.7%.In suburbs such as Santa Monica,many landlords are requiring minimum credit scores of 700 and are willing to hold apartments with a security deposit for just several days,compared to a typical few weeks,says Jessica Sanders,client relations specialist for Pacific Listings, a website for apartment hunters.
A shift may be underway.
In recent years,more apartment complexes have gone up in the suburbs of cities such as Philadelphia,Washington DC and Charlotte as investors make more financing available,says Stockton Williams,head if the Urban Land Institute's Terwillinger Center for Housing.
"Things are starting to change," he says.