“While there have been a significant number of starts since 2010, we don’t feel the multifamily cycle will peak in 2014. The key demand drivers for our product—growth in the 22–35 demographic, which, historically, has preferred to rent versus own; difficulty securing home mortgages; and what we hope will be more steady job creation (and subsequent household creation)—show no signs of weakening anytime soon. That said, we’re concerned that much of the new supply is focused on the high end of the market. With ever-mounting student and credit card debt, we imagine the average renter should be tapped out with where new Class A rents are heading. There should be real opportunities over the next several years developing more moderately priced apartments in the path of growth locations.”
— Carter Siegel, regional development director, East region, Wood Partners

“At Crescent Communities, we believe 2014 will be the fifth or sixth inning of the current cycle, but there is potential for this game to go extra innings. While new deliveries ramped up over the last year, occupancy and rent growth have remained at or above historical norms as a result of pent-up demand and historically low levels of supply between 2009 to 2012. Also, the last couple years have produced remarkable increases in construction costs, but the rate of growth has tapered off, especially in material price escalation. With a couple select markets as exceptions, rental rates are still increasing, and that, combined with insufficient supply the last couple years and reduced price inflation, provides optimism for the current cycle to extend past the ninth inning.”
— Jared Ford, senior vice president, Crescent Communities

“The timing of the market cycle varies from city to city throughout the country, and I’m not entirely sure how one measures the peak. However, if we define it as the point at which we can raise rents with the greatest impunity, we are probably going to be approaching it in many markets in 2014 if we have not already done so. In a good number of regions this year, the focus will be on keeping properties full, reducing loss-to-lease where possible, minimizing concessions, and getting new properties leased up. Since we seem to be in somewhat of an economic recovery, however, I suspect that within a relatively short time—a year or two at the most—the market should stabilize, new properties lease up, and our ability to resume raising rents should take over.”
— Tom Bozzuto, CEO, The Bozzuto Group

“It is hard to say when things will peak for the apartment industry, but as a contractor we have seen a shortage in labor due to the high demand for apartments throughout the country. These shortages have resulted in increased costs for labor in all trades but most predominately in framing and drywall. We have seen large material increases, as well, that are a result of the high demand. In some cases, the pricing has gotten to the point that substantial value engineering and creative design have been necessary to allow a project to fall within the budget guidelines. We do have concern that if costs continue to increase, many projects could get put on the shelf. We can’t say for sure this will happen in 2014, but we can be fairly confident that if costs continue upward, it won’t be too far off.”
— Marc Padgett, principal, Summit Contracting Group

“It is unlikely that 2014 will be the peak as growth in multifamily is strengthened by the momentum of the broader economic recovery and creation of jobs. Additionally, the sector continues to be supported by historically low interest rates, especially short-term rates. We are seeing great opportunities to achieve robust returns through smart, well-planned value-add plays in select markets, and this strategy will be a big focus for Winn in 2014 through our fund platform. At the same time, we are mindful of particular markets around the country that are vulnerable to large amounts of new supply coming on line, which may only temper growth but not necessarily lead to a downturn. But if interest rates rise too quickly, then we could easily see a pendulum shift in multifamily, especially if combined with a plateau or decline in effective rents.”
— Brett Meringoff, vice president, WinnDevelopment