Construction Soars for Rental Apartments

November 16, 2011

The apartment market continues to post big gains, as low vacancy rates and a surge in demand have tightened supply over the last few months. To respond to the increase in demand, construction of apartment buildings is on the upswing and analysts expect it to stay strong in the foreseeable future as more young adults put off home ownership and former home owners facing hardship turn to renting.  

To respond to the need for more apartments, AvalonBay Communities, a rental apartment operator, is reporting $1 billion in development projects underway and UDR has started more than 2,500 units for an estimated $751 million, with other big companies upping their activity as well. 

"At this point, there is some noticeable pickup in new construction, but a lot more pre-construction activity is going on," Mark Obrinsky, chief economist with the National Multi Housing Council, told Investor’s Business Daily.

The tight supply of apartments and an upsurge in demand has allowed landlords to raise rents for seven straight quarters, Ryan Severino, senior economist with Reis, a commercial real estate research firm, told Investor’s Business Daily. But construction projects can take time to get under way, so some analysts don’t see the biggest surge in apartment buildings coming until late next year.

The markets most poised for growth: Dallas; Houston; Orange County, Calif.; Los Angeles; and the Virginia area outside of Washington, D.C. 

Source: “Construction Rises in Apartment Boom,” Investor’s Business Daily (Nov. 10, 2011)

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