Are Developers Meeting Market Demand With New Communities?
Digested from How to Profit From Rising Rents: Build Apartments
Nasdaq (1/12/16) Kusisto, Laura
Given the impressive apartment industry rent growth, developers continue to invest in new supply, with 1 million apartment homes schedule to come online in the next three years. But are they the types of apartment homes residents really want?
Investors have seen luxury apartments as the greatest opportunity for profit, given how high rents have reached in certain metros: Class A apartments command more than $5,000 on average in New York. But the focus on these high-end, urban apartment communities could prove troublesome down the road if demand doesn't support them.
Indicators of strained affordability include increased vacancy rates in urban areas and less aggressive leasing for new projects in 2015 compared to 2013. Other obstacles could include an early recession.