In the Capital Region, the apartment market might seem saturated, but construction of multifamily units, especially those in the urban cores, continues.
Jeff Buell, principal with Redburn Development, which is investing $80 million in commercial and rental living space along North Pearl Street in Albany, said that the market for what he builds — "everyday apartments for everyday people" — is not softening at all.
"If anything, there is an uptick," said Buell whose apartments are centered in Albany, Schenectady, Troy and Watervliet. "We are strategically building in walkable neighborhoods next to big job centers. I would be surprised if you heard from anyone in Albany, Schenectady or Troy who is not seeing good returns on their apartments. We feel incredibly confident that it is a decades-long trend."
Capital Region Builders and Remodeler's Association Vice President Gregg Biche, also the founder of home remodeling firm Quality PM in Delmar, said that the market remains strong in desirable areas, but has seen a softening in renting older units.
"I know I have been forced to update my older buildings to keep up with new units," Biche said.
However, Jesse Holland, the president of Sunrise Management and Consulting, a firm that manages and develops multifamily properties, said he would not recommend construction of new multifamily units at this time.
"The market needs a breather," he said. "What we were seeing over the last couple of years in our market report is that the rate of rent increase has decreased. It's not that the rents have decreased, it's the rents have not gone up. That says that the market is starting to get saturated."
Holland references Sunrise's June 2018 report, which covers 175 properties representing 32,661 units, that showed Albany County rents increasing 0.9 percent. In Rensselaer County, they were up 1.9 percent with Saratoga County coming in with a 1.5 percent increase. Schenectady County saw rents rise 3.7 percent.
Holland said the Schenectady number is higher because of recent luxury projects with higher average rents. These include Mohawk Harbor, described as resort-style living along the Mohawk River, and The Nott on Nott Terrace, which apartmentguide.com calls luxury-style.
He also said modest units are attracting willing renters. For example, @HudsonPark on Myrtle Avenue in Albany, is filling up fast. Some units there are just 300 square feet and feature Murphy beds, which fold up into the wall when not in use.
Buell and Holland agree that millennials as well as baby boomers bolster the urban market with their desire to live in cities. Yet the process of renting to the different generations are very different. A millennial, Holland said, will look once or twice at a place and then rent. A baby boomer, on the other hand, will return to the property several times with their decision to move likely depending on the sale of a home.
While construction continues, it has slowed. Holland said census data shows that building permits for multifamily units — including small projects like duplexes and townhouses — in the four-county Capital Region have dropped. In 2107, the most-recent year for which data is available, less than 900 building permits were issued in the region. In previous years, it had stood at about 2,000.
Part of the problem, he said, is construction costs are high.
"Unemployment is at an 18-year low, so it's hard to find construction workers," Holland said. "Just between 2016 and 2018, the price of plumbing for our projects doubled. And there are the external forces. When Houston got flooded, lumber and Sheetrock [prices] went through the roof. When the tariffs came in, steel became very expensive and still is. If the president closes the [Mexican] border, God knows what will happen. There is a lot of uncertainty in the world now."
Regardless, Buell and Holland agree the apartment market in the Capital Region is diverse. Renters have their choice of urban or suburban, luxury or workforce and those designed for on-the-move millennials or seniors seeking a stable community.
Luckily, Holland said, the Capital Region rental market is generally stable and does not suffer dramatically during a recession. But he would not recommend anyone investing in apartments now.
"I would discourage anyone from building anything right now," he said.