Although the forecast from Marcus & Millichap predicts that this year is expected to see about 371,000 new apartment units added to the market, compared to last year’s total of 320,000 rentals, experts think that growth will tail off in the future.
But, says IRR consulting economist Hugh F. Kelly writing in Globest.com:
Ten percent of US markets are already in hypersupply, where new construction is getting ahead of sustainable demand.
And on Mr. Kelly’s list are the nation’s capitol and such diverse locations as Baltimore, Hartford, Charlotte, Nashville, Oakland and Portland.
http://www.globest.com/sites/paulbubny/2017/03/02/wave-of-apt-deliveries-will-crest-in-2017/
But not all properties will be affected the same. The Marcus & Millichap 2017 US Multifamily Investment Forecast notes that “…highly amenitized class A properties in urban locations will be the most challenged by new stock”, and continues:
Assets with the potential to outperform include the class B and C tier, as well as those in secondary and tertiary markets that have not attracted meaningful interest from developers.
Kelly points out that builders tend to focus on “on upper-income units, a priority that reflects both higher profit margins and the increasing cost of construction”. The rub, he says is:
…new jobs have been largely in low – and moderate – income occupations, and the ‘diverted demand’ of former homeowners comes with budgetary and credit constraints. The challenge for multifamily will be to broaden its range of offerings to match the full spectrum of demand.
With multifamily investments in the news so much, how can you possibly keep up with your own portfolio? A great strategy is to follow our informative posts right here. As the leading multifamily expert in the Eugene area, René Nelson at Pacwest Commercial Real Estate takes pride in keeping her clients up-to-date with all the changes . Visit eugene-commercial.com or give her a call today!
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