Absorption Catch-up
The Raleigh-Durham market suffered from overbuilding before the recession, but the credit freeze during the past few years has allowed absorption to catch up with new construction. As of year-end 2010, the area’s multifamily inventories totaled 103,315 units, with 2,708 units added to the market that year and 4,565 units absorbed.
According to Maximus Advisors, the overall multifamily vacancy rate for the Triangle area fell to just above 6 percent in the first quarter of 2011—a level not seen since 2000 and down substantially from 8.7 percent at year-end 2009. Indeed, demand for apartments in the region continues to grow, with approximately 870 units absorbed in the first quarter of 2011. Continued absorption, fueled by the area’s economic recovery, will exert further upward pressure on effective rents, which were already at an all-time high of $740 per unit as of the first quarter of 2011.
The retreat in new construction over the past two years will only add to the demand for apartments, thereby accelerating rents. According to Maximus, only 1,126 new units are expected to be delivered to the market by the end of 2011.
Nonetheless, last year saw developers closing on multifamily land acquisitions, and projects that were on hold have found new life. According to data published by Carolinas Real Data, the number of proposed units has jumped to 6,675 as of mid-year 2011. Included in the projects coming on line this year is Trinity Commons, a Duke Medical Center–adjacent mid-rise developed by Ravin Partners and Northwestern Mutual with 342 units. Ravin and Northwestern are also responsible for Chapel Hill North, a 123-unit urban mid-rise near the future UNC–Chapel Hill North campus, a notoriously tough-to-develop-in neighborhood. Northland Partners is also busy, working on a high-end garden community north of the city called Meridian at Wakefield, which will be managed by Bell Partners.
