So Much for the Dead Apartment Market

The first quarter of 2016 marked the first that there were no apartment complexes started in three years. At the national level, the apartment market has begun to slow. Lenders are growing very leery of the property type. Absorption in Pittsburgh is slowing. Multi-family has become overbuilt. Those are the headlines. It seems that developers aren’t reading the headlines.

One of the experts concerned about the pace of development is Paul Griffith, president of Integra Realty Resources. His firm forecasts that multi-family construction needs to slow below 500 units for the next 18-24 months for absorption of new units to catch up. The average for the past three years has been above 2,000 units of new apartments. In a recent conversation, however, Griffith noted that requests for appraisals on new deals have not slowed. The activity in the bidding market reflects that.

The most ambitious project in the city is Milhaus’ plan to redevelop the Arsenal Terminal complex just west of 40th Street in Lawrenceville into at least 625 units. The first phase of that project is about 300 units (to be built in 70-75 unit increments) and the $38 million project is being priced by Continental, Franjo, Mistick, PJ Dick and Rycon. Also bidding is the 300-unit South Hills Village Apartments in Upper St. Clair. Mascaro, Mistick, Dynamic and Rycon are bidding the $43 million project. Massaro has been taking bids on its $85 million, 326-unit Empire project in Oakland. In the on deck circle are the first phases of the Riverfront apartments, being developed by NRP Group at the Buncher site in the Strip, and the Station Square West apartments that Forest City/Trammel Crow are proposing. Each is about 300 units. Given the scope of these projects, the apartments won’t hit the market until late 2017 or early 2018.

These 1,500 units are less than one-third of the 4,800 units in the design/development pipeline at the moment.

 

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