On Tuesday, Boca Raton, Fla.-based developer The Altman Cos., announced it had secured an $18.4 million construction loan through the City National Bank of Florida (CNB) to develop a 258-unit apartment community, the Altis at Grand Cypress in New Tampa. A year ago, a groundbreaking in formerly supply-soaked Florida may have had people scratching their heads. This year, it’s becoming more commonplace, particularly in Tampa, Fla., which ranks No. 9 on an enterprise list that Dallas-based Witten Advisors generates using data from the U.S. Census Bureau. Witten takes the number of starts and looks at them as a percentage of existing stock. In Tampa, starts represent 0.9 percent of existing stock, making it the only Florida market to land on Witten’s list (though Atlanta-based Gables Residential did just announce it was starting a 250-unit project in Coral Gables, showing there’s activity in other parts of the Sunshine State).
“Tampa has been the Florida market where construction did continue through the downturn,” says Ron Witten, president of Witten Advisors. “Clearly, it has stood out as the metro [in Florida] where product is least depressed.”
While Florida begins to see things pick back up, other states are seeing a lot more ground breakings. Texas is the leader. Witten’s data indicates that Texas has four of the top 10 most active apartment construction markets in the country. San Antonio is third with new starts totaling 1.2 percent of its existing stock. Fort Worth and Houston are fifth and sixth with new starts in both markets totaling 1.1 percent of their stock. Dallas is in the seventh-place spot with new starts totaling 1 percent of its stock.
“Building activity in those locales certainly isn’t out of hand yet,” says Carrollton, Texas-based MPF Research vice president Greg Willett. “Even in Dallas/Fort Worth, which has posted the sharpest upturn, ongoing construction is only at about half the volume that’s typical during an expansionary period and at only about a third of what tends to be the cyclical peak in development.”
In Carolina, Raleigh came in eighth on Witten's national list with starts equaling 1 percent of stock, while Charlotte was 10th, with 0.8 percent of their stock in starts. “If you are looking at where jobs are growing fastest and where apartment demand is growing, it tends to be Texas and North Carolina,” Witten says. “They’re represented in new supply lists because there is strong demand across these markets. In Texas and the Carolina markets, apartment demand is growing faster than employment because of the concentration of young adults.”
The only cities not in Texas, Florida, and North Carolina on the list were surprising. San Jose led the way with starts representing 1.6 percent of supply, while Indianapolis was second with starts at 1.4 percent of supply. “San Jose is very well-positioned to handle an increase in new product,” Willett says. “Occupancy at just under 98 percent is the tightest in the country, and the metro’s annual rent growth pace of more than 12 percent is the most aggressive anywhere. Some additional supply very clearly is needed there, and the barriers to entry in the market make it rare for there to be any overbuilding for more than very, very brief periods.”
Salt Lake City came in fourth with starts at 1.1 percent of existing stock. Nationally, starts equaled 0.5 percent of existing stock. Willet says the area saw about 2,100 units finished between mid-2010 and mid-2011. “Those projects are moving through initial lease-up very well and have only slightly dampened the metro’s overall occupancy and rent growth pace,” he says. “There are about 1,000 units still under construction, most of them set to deliver in 2011’s last half. Starts during the past few months actually have been very limited, so we’re getting fairly close to working through the process of digesting the significant wave of completions here.”
|City||Development as a Percent of Existing Stock|
|San Jose, Calif.||1.6%|
|Salt Lake City||1.1%|
Source: Witten Advisors