Apartment developers expect new starts to slow significantly now in the post-pandemic era as high interest rates have sidelined investors, John Burns Real Estate Consulting says in a new survey.
The Burns Apartment Developer and Investor Survey, a new quarterly report, says, “We aim to cast light on areas of the apartment market where the industry has lacked clarity, including the long-term development pipeline, access to capital, and lease-up challenges.”
Apartment development survey
The report surveyed 56 developers, investors, and operators with a collective portfolio of 241,850 units in September and October. It confirmed the following:
- Post-COVID construction has peaked, and developers expect starts to slow at least -20%, with 25% of participants believing apartment starts will slow at least -50%.
- High interest rates and cautious lenders have sidelined investors.
- Leasing has slowed in part due to rent hikes.
- Thoughtful project design and competitive amenities drive demand.
- A wave of under-construction apartments will finish in 2024 and into 2025.
- 40% of the surveyed developers have 500+ units under construction.
- Future apartment starts will slow dramatically, with the pipeline shrinking significantly once the current round of development is delivered.
- Almost all respondents say securing development financing is becoming more difficult.
Very few apartment deals are taking place
The John Burns report says transactions and deals have stalled, with only 16% of respondents selling an apartment property in the last six months and no reported acquisitions.
Financing has dried up for new apartments and the current rising supply of apartments leads to soft fundamentals for revenue.
Affordability a key issue
The survey says affordability is a key issue in retaining tenants.
“Commonly cited reasons for non-renewal of leases include moving into a less-expensive apartment and moving in with roommates,” the report says.
John Burns invites those who would like to participate in upcoming surveys to fill out the form, below.
“For participating, you’ll receive the survey results and high-level proprietary JBREC analysis. Join us in refining the industry’s market understanding, and gain valuable data to guide your next venture.”
About John Burns Real Estate Consulting:
John Burns Research and Consulting produces independent research and custom consulting advice to help executives make the most informed decisions possible.