Real estate experts expect the downtown apartment market to continuing thriving despite thousands of new units expected to gush from the pipeline.
That’s the consensus from the five-member panel discussion during Friday morning’s IBJ Commercial Real Estate & Construction Power Breakfast at the Downtown Marriott.
“The downtown apartment market is very, very strong, with seemingly very high pent-up demand,” said Aasif Bade, president of local developer Ambrose Property Group.
Ambrose is among a host of developers building units downtown. Major projects in the works are expected to add at least 2,700 units within the next few years.
Ambrose also contributed to the 1,400-plus apartment units built last year at a cost of $176.7 million. In 2012, the total number of apartments downtown topped 4,700, a 70-percent increase from 2000, according to multifamily brokerage Tikijian Associates.
Panelist John Crisp, a principal for brokerage Cassidy Turley, said demand was strong among young professionals and empty-nesters thanks to amenities like the Cultural Trail, access to professional sports and extensive cuisine options. "I mean, why wouldn't you be atrracted by that?" he said.
But the most telling statistic illustrating demand for downtown rentals is the current vacancy rate, which constricted from 6.9 percent in 2009 to 3.5 percent last year. That's impressive, given the the slew of units coming online.
At the same time, rents have increased. But the bigger concern for Bade is not whether the downtown market will become saturated but at what rental rate apartments will get absorbed.
Rents per square foot grew from 90 cents in 2000 to $1.24 last year, according to Tikijian Associates. But some of the more expensive projects in the works are seeking rental rates of $1.75 to $2 per square foot.
George Tikijian, senior managing director of Tikijian Associates, expects the downtown market to absorb all of the projects in the works. But once they’re finished within the next 24 to 36 months, demand might be softer then, he said.
For now, though, developers are smiling. Bade at Ambrose is redeveloping the American Building with TWG Development LLC, formerly The Whitsett Group, at 333 N. Pennsylvania St. to accommodate 72 apartments.
It’s set to open Nov. 1.
“We have a waiting list of people who are very interested in moving into the building,” he said.
Joining Bade and Crisp on IBJ’s panel Friday morning were Jamie Browning, vice president of real estate development of Browning Investments Inc.; Jeff Hagerman, president of The Hagerman Group; and Ross Reller, senior vice president and director of land services for Colliers International’s Indiana region.