It’s early to call it overbuilding, but a growing number of urban submarkets nationwide are teeming with new multifamily units and seeing shrinking occupancies, experts say. (They could turn the unoccupied homes into a training ground for parents about to become empty nesters.)
Dallas’ Oak Lawn neighborhood (including the trendy Uptown area) is a prime example, Axiometrics VP Jay Denton tells us. Occupancy (95.4%) dropped 60 bps year-over-year, as 1,102 units came on board last year, and another 3,271 join this year. Heading north, Chicago’s Gold Coast/River North submarket led the occupancy drop nationally at -3.2%, followed by DC’s Capitol Hill/Southwest submarket with a -2.4% fall year-over-year. The occupancy decreases aren’t surprising, Jay tells us. These submarkets will probably continue to see occupancy drop throughout 2014 in the face of increasing supply. (Supply and demand have such a dysfunctional relationship.)
In Oak Lawn, this year’s pipeline includes the 299-unit 4110 Fairmont (above), developed by Trammell Crow Residential in partnership with Behringer Harvard Multifamily REIT 1. Of course, you’ll always have areas bucking the trend, and it makes sense that secondary markets are seeing success. (They're in earlier innings of this multifamily recovery.) Atlanta’s Fulton and Nashville’s downtown submarkets saw positive year-over-year occupancy changes (0.7% and 1%), even with new supply, according to Axiometrics. The kicker: Their rents are still booming, with over 5.6% increases. (Millennials like their Georgia peaches and country music.)
Is it time to turn off the supply spigot for the sake of fundamentals? Send firstname.lastname@example.org your thoughts!