Gangbusters. “Apartment construction [is] going gangbusters.” The Business Journal reported in August. Another recent report by this source cited “a wave of apartment projects planned across the Triad, where apartment developers and non-apartment developers alike are diving into the market.” By Reis’ count, the 230 market-rate units that completed construction in 2011 will be followed by 967 in five projects all told in 2012, all of which had delivered per the date of this report. Moreover, 1,485 units in nine more were under construction as of late September, mainly without specified completion dates. Others are moving forward in the planning pipeline (see below). The total could be revised upward: Reis’ second quarter analysis calls for the completion of nearly 1,140 market-rate apartments next year.
From a statistical point of view, the vacancy rate is not sufficiently low that the market could withstand an onslaught of new development without strain if absorption does not keep up. Reis put the second quarter rate at 7.3%, up 20 basis points for the period, down 110 year-over-year. Net absorption accompanying the 871 units counted as the first half 2012 construction completion total was favorable at 918 units. Respective completion and net absorption totals for the second quarter alone were 631 and 428 units. The question turns to the future of demand. While the latest forecast calls for a 2012 net absorption total of 1,720 units, data for July and August added little help: that two-month sum was only 14 units (amid no new supply deliveries). Rent growth, meanwhile, must be considered as one of the factors contributing to the new wave of development. The modest losses suffered by the average asking and effective rates in 2009 were redeemed by the end of 2010. Growth has accelerated since. At $681 and $640 per month, respective rates for the latest quarter were up 1.0% and 1.4% since year-end (with second quarter seeing nearly all of the growth) following gains of 2.0% and 2.4% in 2011. July-August followed with increases of 0.3% for both rates.
The largest project to complete construction in 2012 will be the 360-unit Hayleigh Village complex in Greensboro which delivered in April. A June 2012 start, meanwhile, is indicated for the 190-unit Lofts on Little Creek in Winston-Salem. The 264-unit Wendover at Meadowood broke ground in February in Greensboro. In addition, there have been several recent announcements. As reported by the regional Business Journal in late September, the “final piece of a rezoning process that began in 2010” has fallen into place for Octagon Partners’ “plans to invest about $20 million to convert the historic Mock-Judson-Voehringer hosiery mill [in Greensboro] into 150 loft-style [luxury] apartments.” New to Reis’ list of planned and proposed projects is The Edge, a 166-unit endeavor intended for Winston-Salem. As of mid-September, the project was awaiting final approval from the city, the Journal reported at the time. A 136-unit project on the current site would be razed. Also in September, Greensboro approved a proposal for a $20 million, 200-unit property near the Friendly Center. Developer Lomax Properties had previously intended a $55 million, 100-unit condo project for the site. In addition, economic growth has positioned the town of Kernersville as a new hot spot for apartment development.
Although July and August were sluggish, Reis expects demand to measure up to any challenges posed by new supply. An ongoing decline in the vacancy rate is expected along with persistent positive rent growth at increasing rates.