Builders brace for apartment building boom
Copyright © 2022 Albuquerque Journal
The single-family home market isn’t the only Albuquerque real estate market upended by the coronavirus pandemic.
In fact, most real estate segments are experiencing unprecedented trends, including the “hot” multifamily housing market.
Albuquerque’s rental occupancy rate sits at around 95.8% – just above the healthy recommended 95% occupancy rate, according to a Yardi Matrix report in February,
Some of the rise in renters may be fueled in part by previous and potential landlords forced out of the housing market, Josh Rogers, senior vice president of development at Titan Development, told The Journal.
Rogers said that although the real estate sector was temporarily halted for a few months at the start of 2020 due to the onset of the pandemic, it quickly kicked into high gear with massive demand for housing thanks to factors such as the lower interest rates.
“It’s been a really exciting time for multifamily because demand has never been higher, but at the same time you’re seeing it expand in the market,” Rogers said.
Alan LeSeck, executive director of the New Mexico Apartment Association, said the current market is “very hot,” in part because of the lack of apartment development dating back to before the pandemic.
“Do Not Track”
Since 2013 and before 2020, LaSeck said Albuquerque averaged about 500 new units per year, below what the city needed to accommodate new residents.
“It doesn’t take much to move the needle,” he says. “…We just haven’t kept up…with the amount of construction we’ve had to do over the years.”
Both LaSeck and Rogers said there is a national housing shortage overall, and Albuquerque is not immune.
Home prices in Albuquerque continue to hit record highs, with the current median home value standing at $315,000, up 18.9% from a year earlier, according to the February report from the Greater Albuquerque Association of Realtors.
Rising home prices could mean some people are being squeezed out of the market, Rogers said. Anecdotally, he said he’s heard of people who sold their homes only to be unable to buy another due to rising costs or a lack of availability.
Some would-be owners are also left to rent since home values have risen at such a drastic rate, he said.
These former and future landlords are then pushed into the rental market, increasing occupancy and hurting tenants, Rogers said.
Higher rental costs
High occupancy also means rental costs have risen due to increased demand and lack of supply, he said.
“It doesn’t take much to tip the scales,” Rogers said.
In Albuquerque, the average apartment rents for $1,170 per month, according to RentCafe.
Although rents have increased, LaSeck said it’s possible that new construction underway and planned for the near future will help reduce, or at least stabilize, rental prices.
However, he said, it will still be some time before many new projects are available for rent.
All of these changes have prompted some developers to pursue more multi-family builds than they did before the pandemic.
“There’s a ton of construction going on,” LaSeck said. “2021 and 2022 are likely to be record years for construction.”
Among the leaders in multi-family development is Titan Development.
The company is currently working on three multi-family developments totaling over 500 units.
“Very strong” demand
He is also working on the largest multi-family development under construction with the 281 Allaso High Desert apartments in San Antonio and Tennyson Street.
The projects, located mostly in the northeastern heights, were planned long before the pandemic changed the rental market, but the company is considering more multi-family developments in the future due to the changing market.
“We intend to complete more projects and deliver more units in Albuquerque…to help alleviate the multi-family housing shortage,” he said. “But the demand is very high right now, and there’s just a lot of people apparently moving to Albuquerque and…we have to provide housing for those people.”
LaSeck said for every 10,000 new residents, there must be about 3,400 apartments because about 34% of people typically rent.
Some of Titan’s new developments, such as Allaso Vineyards in Holly and Ventura, target an aging population that may be looking for a new place to live with less maintenance than a single-family home.
Residents of older demographic groups moving into an apartment could also contribute a bit to housing demand, he said.
“So, is it going to be a monster swing in the market? Absolutely not, but hopefully it will provide some opportunities for some homes to come on the market as people downsize and make those decisions,” Rogers said.
Pipeline of growing projects
He said he expects more builders to turn to multifamily options.
“You’re going to see a lot more projects because that demand is just pretty remarkable at this point,” Rogers said.
Other businesses are also following demand by starting new multi-family buildings.
In Albuquerque, about 2,000 units across 12 properties are under construction, with an additional 2,485 units planned across 16 properties and 5,143 potential units, according to Yardi Matrix.
Among the larger developments is Overture Andalucia, a new multi-family resort on the west side of Albuquerque aimed at adults 55 and older.
The 171-unit complex, owned by investment, development and property management firm Greystar, is expected to have units ready by this fall, according to the company.
Goodman Realty is also moving forward with multi-family housing construction this year for the first time since the 1980s, Goodman Realty Vice President Scott Goodman said.
Although the company is only working on one 207-unit building this year, it plans to pursue this type of development, he said.
“We’re looking at doing more apartments,” Goodman said. “…Apartment rents have really skyrocketed, apartment construction costs have really skyrocketed, and I think the supply of apartments is really down, and that’s part of the reason why which you see what we see…and the city needs more apartments.”
He said the company’s plans to build lofts at Winrock in Albuquerque’s Uptown neighborhood predate the pandemic, but increased demand for apartments has led the company to consider other areas to pursue. multi-family development, such as near the Journal Center.
Goodman said multifamily housing could be particularly attractive to developers because it’s seen as a less risky investment and it’s also easier to finance.
More development, he said, could also lead to lower rental costs and help solve the affordability problem.
“The more apartments we have, the more supply we have, the more affordable it should be,” he said.