Get ready for apartment building boom
Sunday, June 10, 2007
By MARIAN ACCARDI
4,242 new unitsin 'pipeline' called'an exciting time'
New construction in the apartment market in Huntsville and Madison was limited last year, with only 72 new apartment units coming on line.
That's about to change.
An apartment market survey for the cities of Huntsville and Madison shows a tremendous amount of growth in the next few years, with 4,242 new apartments in the "pipeline," that is, projects under construction, projects in the planning stages or in the due diligence process with land either owned or secured by the developers, or apartments being planned for future construction.
"This is more activity than we've had in probably 15 years," said David Wilson, the president of The David Wilson Co. LLC, a commercial real-estate appraisal firm that tracks the apartment market in the Huntsville area and prepares the bi-annual Apartment Market Survey. "It's an exciting time for the apartment market. Class A properties are performing well with high occupancy rates and less use of concessions, so that's an encouraging sign."
Some of the deals in the pipeline are speculative, though, Wilson said, and might not happen.
Wilson points to several factors behind the market activity.
"Apartment development follows employment and population growth," he said. "A strong economy will attract the interest of apartment developers." When there's a strong economy, combined with strong rent growth for the last three years, "you have a recipe for lots of development."
He believes the job and population growth "will be sufficient to allow (new apartment properties) to be added without having a negative impact on the overall market."
Although some apartment developers are local, "national developers are attracted to Huntsville because of its growth," Wilson said. "There's also a tremendous amount of investor interest in buying existing apartment complexes."
Tuscaloosa-based Sealy Realty Co. Inc. is the largest owner of apartment properties in the local market with 1,929 units in seven different properties.
Job and population growth has been the major force behind the company's increasing presence here, said Charlie Sealy, vice president of Sealy Management Co. Inc.
"The overall (apartment) market has been stable the last couple of years," said Sealy, who now lives with his family in Huntsville, the company's second largest market in terms of the number of units. "There hasn't been overbuilding in the apartment market, but "the supply is about to dramatically increase."
New construction under way includes the 372-unit Ashbury Woods, luxury apartments on Zierdt Road, and Brook Haven, a 63-unit low-income housing tax credit property on Meridian Street.
Wilson said that seven apartment projects in all - with 1,658 units - could break ground this year alone. One upscale complex, Madison Park Apartments on Slaughter Road, has already broken ground.
Some of those developments are planned in two phases, Wilson said, with developers planning to build a second phase "depending on the health of the market."
Sealy plans to break ground on the first phase of Emerald Ridge on Plummer Road at Research Park Boulevard in about two months. The first phase would include 204 apartment units, he said.
The company plans to start the first phase of another apartment property in the early fall, Sealy said. The first phase would include about 250 units, he said. That complex, which hasn't been named yet, is planned for property near Nance Road north of U.S. 72.
There's room for additional phases at both properties, Sealy said.
In the year-end 2006 Apartment Market Survey of 71 conventional apartment properties (all of them with 60 or more units), the average occupancy rate was 91.1 percent, as of last December. The occupancy rate improved to 93.4 percent when excluding three major property renovations.
"Historically, the end of the year shows a slight decline," in occupancy rates, Wilson said.
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