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Builders Capitalize on Low Inventory Levels

The demand to rent is high. Interest rates remain low. Investors realize that the bottom has come and gone and values are now improving. Gee, if they had only been reading my blog, they would have known to buy months ago. And lastly, inventory levels are very low. The combination of those 4 factors have created an urgency to buy in Boise and Meridian. We've actually seen quite a bubble in the last 30 days. I hate using that word, but what better describes the huge jump in pricing that we've seen. Evidently the builders and developers saw the demand and are more than willing to help provide the supply. There are 1,200-1,600 rental units in the works to be built. Some are under construction now while others are in early planning stages. Below are some of the sites and status. This does not include the current build-out of four plexes in unfinished subdivision like Sommersby, located at Ten Mile and Franklin. That same builder is looking at building the same 4 plexes in Southeast Boise near Broadway and I-84.

APARTMENT CONSTRUCTION - 2012

Project Name # units Proposed Status
12th st. Boise, Sec. 42 Senior 53 Under Construction
Traditions Senior, Eagle N. of Ustick 170 Under Construction
N. of Overland, E. of 5 mile in Cory Barton Sub. 126 Permits/Foundations
Gramercy Villas 48 Done
Gramercy Phase 2 I think they are looking for $$$ to do this still   Early Planning Stages
Macys Down Town Boise   Demo
2 projects off Royal St. by BSU. Student Housing Quad   Concept Planning
Regency at River Valley, E.of Eagle rd., S. of Ustick 240 Plans, Site Work
Park Center 5 B I would guess fewer units will be built 278 Planning/public hearings
Park blvd and Front street, East of State Tax Commission bldg 68 Early Planning Stages
BSU Apts on Lincoln & Beacon 90 x 4 beds = 360 beds 90 Done
Crossfield Apts, S side of Ustick W. of Meridian rd. 80 Plans, Site Work
Apts by Settlers Park, W. side Meridian, N of Ustick. 36 Planning/public hearings
Franklin & 10 Mile Not real at this point (369 units)             Early Planning Stages
  1189  
Significant Remodels    
Pioneer Square 43 Almost Done
Longmont 15 Done
Lancaster 30        Should be done this year
  88  

Boise rents were starting to improve and vacancy has been excellent, so what will this substantial increase in supply do to the rental market and the investment sales market? Well, based on some of the pricing that has already come out, it looks like the new construction will strengthen values. I do think the increase in rental supply will have an effect on vacancy rates. Other contributors to vacancy is the huge move-in specials being used to fill these complexes quickly. We've seen $99 move-in specials and one month free rent. That surely will entice some of our current tenants. But what the new construction will do to rents is the real mystery? We're seeing fantastic floor plans with upgraded finishes similar to new high-end homes so rents are much higher than average. It's possible this new construction will hurt rents, but with the higher rents, we may see that void filled in providing high-end rental housing for those young professional wanting to rent instead of purchasing a home. In fact, their rents are so high, they may make the older and more simplistic rentals seem more affordable and therefore allow for modest rent increases. Only time will tell.

As promised, I have another post coming soon that talks about how the improved rental market has caused many first-time managers to enter into the business and how some companies are doing what they can to capitalize on the hot market.

04-25-2012
Tony Drost
Fair Housing
06-11-2014

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