As we previously blogged about here, in our post entitled “Realtors Calling ‘The Age of Multifamily’ Residential Development as North Carolina Sees the Impact”, apartment building and apartment transactions (sale and purchase of already-constructed complexes) is on the way up. Way up. I can see the construction aspect clearly, right here in Raleigh, as I drive to and from our offices in downtown Raleigh. As we said then, in October, “Multifamily residential is hot. Real hot.”
But what about rental rates and occupancy rates? These are, after all, the fundamentals driving the sales, purchases, construction and entitlements referenced in our prior post.
Well, the Triangle Business Journal published today an interesting blurb on this very topic, entitled “Apartments Springing Up Across Triangle“. The title evokes a story of construction-mania. But the subject goes deeper, into the kind of information driving the business decisions of developers and private equity funds. Check it out:
“More than 9,200 apartment units are currently under construction in the Triangle, and another 6,300 units are proposed to be built, according to the most recent semiannual apartment market report from Real Data, a market research firm based in Charlotte. Real Data’s report for January shows that the vacancy rate for apartment communities in the Triangle dropped to 5.5 percent. The rate is down from a 6.6 percent vacancy rate the year prior, which was already the lowest rate reported since 1998. The average rental rate for an apartment in the Triangle increased to $868 per month, up from $834 a month the year prior. But the average rental rate for a new apartment built in the last 12 months is around $1,400 per month.”
Yep, the average–average–rental rate for a new apartment in the Triangle, built in the last 12 months, “is around $1,400 per month.”
So, let me get this straight: interest rates are so, so low in the “wake” (or the end, or the close to the end or the almost to the close to the end, or whatever) of the Great Recession, construction prices are competitive, and land is still relatively cheap, yet monthly rental prices for new apartment units are at or higher than they were before the Great Recession? As an aside and a point of comparison, I paid $1,400/month for my first apartment in Manhattan, on 49th Street and 9th Avenue in Hell’s Kitchen. Granted, that apartment was old. And small. But I was some 2 avenue blocks from Times Square.
Anyway, while this isn’t a true legal post, I think our readers and clients will find great interest in this latest real estate frenzy–apartments.
Mike Thelen practices in Womble, Carlyle’s Real Estate Litigation and Land Use practice group. He regularly represents a wide variety of clients, from local governments to businesses, in land use and land development matters in both state and federal venues throughout North Carolina.
Categories: Economic Development