Apartment Construction Boom (2011-??)

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FISHMANPET
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Re: Apartment Boom

Postby FISHMANPET » August 11th, 2013, 9:41 am

Another article in the Star Tribune about super low vacancy rates and pent up demand. Even the pessimists say we can absorb thousands more units in the metro.

http://www.startribune.com/business/219126181.html

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min-chi-cbus
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Re: Apartment Boom

Postby min-chi-cbus » August 14th, 2013, 9:01 am

From the article:
"....the Metropolitan Council had a forecast that said household growth would require a total of 16,500 units per year in additional units of housing of all types.....[and] has updated that forecast to an average need of more than 17,000 housing units every year through 2030.

Then there was a deep recession, and new units of housing of all types fell to less than 5,000 in 2009 and again in 2011. In 2012 there was a rebound to more than 9,000 units, and annualized data so far for 2013 suggests a similar total for this year.

It’s been seven years since the total output matched or exceeded the 16,500 to 17,000 annual forecast of need, and one developer shared with me a rolling tally that suggested that by the end of the year the Twin Cities market will be short more than 50,000 housing units from that Met Council trend line.

Whether 5,000 units or 50,000 is more accurate, his point is the same: New construction is easily justified
."
When put that way, all I can say is......WOW, we should be in for the long haul everyone!!

When you think about it, the population of the metro area has grown (rock steadily) by between 30,000 and 45,000 a year since.....forever. If few units were built and there was truly only one year when we arguably "over-built", then where are all of these newcommers moving to? It's no wonder that the vacancy rate is low AND the SFH market is exceeding expectations as well!

*Edit: And here's the Yin to that Yang (or is it the Yang to that Yin?):
http://www.startribune.com/housing/219507831.html


Despite news that vacancy rates in the METRO fell to 2.3%, this article was published with about as much pessimism as one could possibly muster given all of the positive signs. Still, the worst that was said was that the market will moderatly adjust closer to normal by 2014.

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Re: Apartment Boom

Postby twincitizen » August 14th, 2013, 6:12 pm

KARE 11's Jana Shortal covered this story as well: http://www.kare11.com/news/article/1035 ... ental-boom

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min-chi-cbus
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Re: Apartment Boom

Postby min-chi-cbus » August 15th, 2013, 7:21 am

Right, but the expert that was interviewed had stated broadly that as supply increases, so does vacancy. That's not necessarily true, as long as demand is still outpacing supply, like it is so far.

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Re: Apartment Boom

Postby lordmoke » September 5th, 2013, 2:31 pm


twincitizen
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Re: Apartment Boom

Postby twincitizen » September 6th, 2013, 1:21 pm

Another story about the boom makes the F&C cover today: http://finance-commerce.com/2013/09/twi ... nt-demand/ (paywall)

The gist of it is that we have the lowest apartment vacancy rate in the country, outside of NYC, even though the vacancy rate downtown has risen by roughly a point in the last 12 months (but is still like 3% or something obscenely low). Lots of quotes from Kelly Doran. He predicts that some developers will be more courageous than others and we will continue to see more downtown apartments proposed. Doran (correctly, IMO) questions the depth of the luxury housing market. Lots of talk in the article about how nothing will get built (without subsidy) that doesn't rent for $2/sf or more. Unless middle class incomes begin to rise, it's gotta stop somewhere.

Overall the article was very positive and paints a bright picture for the future of apartment development in the neighborhoods where it's already happening (North Loop, Downtown, Uptown, Southdale, etc.) I too think those areas will continue to be hot. Once the Green Line is up and running, I'd love to see the Midway, Frogtown, Capitol area, etc. get some MARKET RATE development going. I think downtown St. Paul will see more conversions from Class B/C office space to residential, which is exactly what that area needs: residents. The current trend of only subsidized/affordable housing along the middle stretch of the Green Line is definitely worrisome. Filling in the spaces between with market rate apartments would go a long way to stabilizing that entire stretch of University, from 280 to the Capitol.

My god, we have got to get that effing Kmart on Lake Street demolished ASAP. If the property owner was a savvy developer they would plop a pair of 6-story mixed use buildings in the existing parking lot right now, framing the future extension of Nicollet through the site. Come to think of it...why don't they do that?

Another interesting line in the article was that apartment development in the in-demand suburban areas will continue to be viable as well, even without reaching the $2/sf rent threshold, due to lower land costs. The greatest impediment to continued apartment building in the burbs will be political. This assessment is spot on IMO...

I look forward to the next project announcements downtown and elsewhere, even if we're in a little lull right now as there is so much announced and under construction already. Mill & Main is 95% leased, just in case there are any doubters out there :P
Last edited by twincitizen on September 6th, 2013, 1:30 pm, edited 1 time in total.

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Re: Apartment Boom

Postby MNdible » September 6th, 2013, 1:30 pm

twincitizen wrote:If the property owner was a savvy developer they would plop a pair of 6-story mixed use buildings in the existing parking lot right now, framing the future extension of Nicollet through the site. Come to think of it...why don't they do that?
Because the taco truck that parks there is making mad cash.

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Re: Apartment Boom

Postby twincitizen » September 6th, 2013, 1:32 pm

The City should just shut down Champions and we can put the taco trucks (and now a corn cart) there instead.

BOOM. Three birds with one stone!

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Re: Apartment Boom

Postby RailBaronYarr » September 6th, 2013, 1:58 pm

twincitizen wrote:Lots of talk in the article about how nothing will get built (without subsidy) that doesn't rent for $2/sf or more. Unless middle class incomes begin to rise, it's gotta stop somewhere.
Boy how great would it be to see parking mins removed? I understand Minneapolis is not as bad as many other cities in this regard, but I have got to believe this is still a major impediment to market rate apts below $2/sqft...

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Re: Apartment Boom

Postby FISHMANPET » September 6th, 2013, 2:02 pm

Stick built is cheap, but two levels of underground poured concrete parking aren't...

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Re: Apartment Boom

Postby RailBaronYarr » September 6th, 2013, 2:12 pm

Has anyone ever been able to answer, either on a case-by-case or year-by-year (market aggregate) basis how many parking spaces per bedroom a developer would have built vs what they actually built (with variances) vs allowable by code? I'm just curious how many fewer spaces a developer would build in these recent projects if given the opportunity.

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Re: Apartment Boom

Postby mplsjaromir » September 6th, 2013, 2:18 pm

It may well be tangential to the KMart on Nicollet Ave, but the chairman of Sears seems to be an interesting fellow to say the least. Not sure if his aggressive and combative business conduct would be hurtful or helpful in getting the right of way restored.

http://www.businessweek.com/articles/20 ... e-troubles

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Re: Apartment Boom

Postby Rich » September 6th, 2013, 2:40 pm

RailBaronYarr wrote:Has anyone ever been able to answer, either on a case-by-case or year-by-year (market aggregate) basis how many parking spaces per bedroom a developer would have built vs what they actually built (with variances) vs allowable by code? I'm just curious how many fewer spaces a developer would build in these recent projects if given the opportunity.
There are no minimum parking requirements in downtown Minneapolis. So developers there already have the freedom to provide however much parking they want, right? Wouldn't a survey of recent apartment projects (1368 LaSalle, Nic on 5th, 222 Hennepin etc.) give us a sense of what developers are deciding regarding parking when freed from regulations?

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Re: Apartment Boom

Postby MNdible » September 6th, 2013, 2:55 pm

Anecdotally, if you look through the projects that come before the planning commission, my sense is that of all of the different variance requests that you see, very few of them are for developers looking to go below the parking minimums.

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Re: Apartment Boom

Postby widin007 » September 6th, 2013, 3:14 pm

mplsjaromir wrote:It may well be tangential to the KMart on Nicollet Ave, but the chairman of Sears seems to be an interesting fellow to say the least. Not sure if his aggressive and combative business conduct would be hurtful or helpful in getting the right of way restored.

http://www.businessweek.com/articles/20 ... e-troubles
Well if anything the way he runs his company will send it into the ground sooner. Maybe Kmart will disappear on its own?

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Re: Apartment Boom

Postby FISHMANPET » September 6th, 2013, 3:16 pm

They could be not asking because they don't think they'll get approved. If they've got a project that only makes financial sense if they can go below parking minimums, are they going to spend a lot of money making the proposal that will get shot down because they can't get the parking variance they need for it to make sense financially?

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Re: Apartment Boom

Postby MNdible » September 6th, 2013, 3:37 pm

Nah. They request all sorts of other variances that effect the viability of the project. No reason why this one would be any different.

I know it messes up the narrative that you all have created, but developers aren't pushing against these minimums. The way that some of these developers belly-ache about regulations they don't like, we'd definitely know if the parking minimums were cramping their style.

There may be some very specific sub-markets where this isn't true -- for example, student housing around the U, which (I believe) has different parking regs than the rest of the city.

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Re: Apartment Boom

Postby FISHMANPET » September 6th, 2013, 3:47 pm

I think right now Dinkytown is the only place where there's a good case for removing parking minimums, though I'd be OK with just removing them all wholesale and let developers do whatever they want, even if it's at or above current minimums.

Though I'd be curious to look at some recent developments around the city and figure out how far above the minimum developers are going, if they're actually going above that minimum.

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Re: Apartment Boom

Postby RailBaronYarr » September 7th, 2013, 12:05 am

Rich wrote:There are no minimum parking requirements in downtown Minneapolis. So developers there already have the freedom to provide however much parking they want, right? Wouldn't a survey of recent apartment projects (1368 LaSalle, Nic on 5th, 222 Hennepin etc.) give us a sense of what developers are deciding regarding parking when freed from regulations?
Am I correct in saying that's only true for parcels zoned B4 (Service, Commercial, and Neighborhood), with residential still requiring 1 visitor space per 50 units? Seems like most of downtown (bounded by the river N/E and 94 S/W is B4.. but I'd be curious to see the shift in spaces per unit for structures built before and after the change went in to effect in 2011 (which is relatively recent). I'd say downtown is a different animal from a housing and resident perspective than many other areas of the city simply because the people affording to live there can without question choose to afford a car, whether or not their job is downtown. With that said, a quick survey of developments in the B4 districts ([Dweling units] [Commercial sqft if applicable] [Required parking spaces under general code] [Parking Spaces proposed/built by developer] [Ratio of market-rate spaces provided to parking minimum requirement]):

- Alatus: [318 DUs] [9,200 sqft] [336] [153] [45.5%]
- LPM: [354 DUs] [22,700 sqft] [399] [289] [72.4%] (an additional 99 spaces may be provided later, up to developer)
- Nic on 5th: [33033 DUs] [25,860 sqft] [434] [430] [99%]
- 4Marq: [262 DUs] [2,000 sqft] [266] [217] [81.5%]
- 222 Hennepin: [286 DUs] [40,0+00 sqft] [366] [300] [81.9%]

Obviously quite the range in ratios of market to typically-required, but note that none of them offered more parking than is usually requires elsewhere in the city.
MNdible wrote:I know it messes up the narrative that you all have created, but developers aren't pushing against these minimums. The way that some of these developers belly-ache about regulations they don't like, we'd definitely know if the parking minimums were cramping their style.
Yeah, it's just a giant narrative a few of us are spewing here to further some agenda. It's not like there's a ton of research out there supporting it.

The point is that 60+ years of land-use requiring parking in this way along with decades of disinvestment in transit have had a distortionary effect on what the market desires. Jobs, amenities, etc are so artificially spread out due to the over-ample parking required for so long that now people actually do need a car to get to most destinations (without spending 1.5 hours and 2 transfers on buses). It's a foregone conclusion in renters' minds that parking will be included in some shape or form because parking is bundled in to 99% of the rest of the places they drive to, which is why we're not hearing developers 'bellyache' about it right now (though anecdotally I have seen projects on this site ask for variances, so it is happening). And even with all that, there's still proof across the country that lowering/eliminating parking minimums lead to developers providing less of it (and more housing being constructed, often in a re-use format, as a result).

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Re: Apartment Boom

Postby MNdible » September 8th, 2013, 1:58 pm

I'm not saying that there's no validity to the forces at work. I'm just saying that people here keep trying to prove that the parking minimums are driving up prices, when there's very little evidence that this is the case. People keep saying that the market doesn't want to provide these parking spaces, but it's pretty clear that the market does want to provide them.


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