The frequent silhouettes of cranes littering the skylines in most large metro areas aren't threatening the health of the apartment industry, experts say.
Although there are several markets approaching heavy saturation, industry leaders aren’t concerned about the more than 75,000 units that are expected to deliver before the end of this year, according to data from Dallas-based Axiometrics. The research firm also expects more than 222,000 units to come to fruition next year.
Ed Pettinella, CEO of Rochester, N.Y.-based-based Home Properties, noted the healthy construction pipeline isn’t indicative of another recession since financiers and developers alike are still feeling the wounds of the most recent downturn.
“Lenders are still stingy,” he says. “A lot of developers got burned, they’re going to be more cautious this time around. They’re getting in the game, some new players are getting in the game, but we’re not seeing the massive figures.”
During a session at the MFE Conference in Las Vegas on Sept. 23, Pettinella was joined by several other CEOs and discussed the current state of multifamily construction.
Greg Mutz, CEO of Chicago-based AMLI Residential was more cautious compared to the rest of the group.
“We worry about it all the time,” he says. “If you don’t, you’re nuts.”
However, his worries are calmed by the growing degree of difficulty in new construction.
“It’s tough to get subcontractors,” he says. “It’s tough to bid these things out. So, the whole degree of difficulty in producing new supply is as high as it’s been in my career.”
Even so, Mutz identifies Seattle, Denver and Austin as areas of concern.
Tom Toomey, CEO of Highlands Ranch, Colo.–based UDR, has Dallas on his radar for potential oversupply, but at a macro level, he doesn’t think oversaturation will be the culprit of breaking the industry's momentum during this upswing.
“I think today, there’s more data, we’re putting up a lot more expensive deals than we have in the past,” he says. “Banks are better informed about the lending patterns. And there are a lot less banks to start with, so the capital flow is going to be a heck of a lot better at cutting off the supply before it drives us into what we’ve had in the past.”
All of the Texas-talk piqued the interests of Rick Graf, CEO of Addison, Texas-based Pinnacle.
“The key in those markets, as it is in any market, but particularly in the Texas markets, has been jobs,” he says. “And I’m less concerned about Austin, Dallas, Houston for different reasons because there’s been tremendous job growth.”
Lindsay Machak is an associate editor for Multifamily Executive. Connect with her on Twitter @LMachak.
