by Dan Rafter
The apartment boom hitting the Midwest is showing no signs of slowing. But the commercial real estate pros working these markets aren’t worried that developers are adding too many multifamily units. The new units that have hit the market are renting quickly, with multifamily vacancy rates in many Midwest cities still hovering under 4 percent.
But commercial real estate brokers do have one concern: Are developers bringing too many high-end, and not enough market-rate, apartment units to their cities?
The majority of new apartment stock in cities such as Columbus, Chicago, Kansas City and Minneapolis are of the luxury variety. This isn’t surprising. Many of the people renting in the center of cities are renting by choice. They want rooftop decks, state-of-the-art fitness centers and plenty of storage for their bikes.
But these new luxury apartments come with high monthly rents. Are developers shutting out those renters who don’t make big annual salaries?
Joel Pizzuti, president of Columbus, Ohio, commercial real estate company Pizzuti, wonders about this in his market.
“Columbus, like a lot of cities, is producing plenty of high-end urban housing,” Pizzuti said. “It is important for us to make sure we keep some balance, that we’re not just providing for-rent and for-sale housing at the highest end. We need to make sure we have different points of entry for different folks at all different demographics.”
Pizzuti isn’t alone. Chris Perry, senior vice president of the Minneapolis office of Grandbridge Real Estate Capital, said that much of the new apartment product in the Twin Cities market has been of the higher-end variety, boasting high-end amenities. The rents are higher for these units, but that hasn’t stopped residents from renting the new apartment stock quickly.
But like Pizzuti, Perry does say it’s important for developers to bring a variety of new apartment projects to the Twin Cities — not just luxury units.
“How many more high-end units can the market absorb?” Perry said. “That’s a good question. For the foreseeable future, it looks like the high-end units will continue to be absorbed. But we don’t know for how long that will be the case.”