Saturation of high-end apartments drives demand for units at market prices



NEW YORK CITY – Most of the upcoming new construction is high-end rental properties, which has strained the availability of market-priced units as the housing type has seen full occupancy in the current market. “You don’t see a lot of market-priced apartments under construction, ”Marc Heller, partner at Akerman law firm, told “Much of the market is focused on the high-end rental market. ”

Due to the lack of market-priced housing to accommodate middle-class incomes of between 70,000 and 75,000, this section is being squeezed by the affordability crisis, according to Heller. Many struggle with the costs of housing and utilities and with their overall income, he added.

To ease the affordability crisis, Heller said some of its customers are buying older inventory typically built in the early 2000s, or maybe 25 years old, and upgrading construction units to accommodate that slice of the market and capitalize on it. on demand. “It’s cheaper than building a new stock. You can buy a property with good framing, decorate it and increase the rents over time, ”he said.

As the gap between high-end apartments and value-added apartments widens, Akerman clients see a real opportunity to take apartments and turn them into affordable housing for low to middle income rents, in particular. part thanks to the new construction of luxury apartments. that have saturated the market, according to Heller.

According to a recent article, the reason workers ‘housing is well positioned, even better than Class A apartments, is that in the event of a downturn, most workers’ housing tenants will stay put, and many tenants in the luxury segment will experience a downturn. housing the workforce.

“The industry is all about people trying to find a product that meets their needs, and this will continue even in a declining market. In the highly developed space, there is going to be a supply and demand problem in a down cycle, ”Pat Jackson, founder and CEO of Sabal Capital, told “Right now, the vacancy rate in this market is already higher than that of workforce housing. As demand decreases, it will put more pressure on the upper segment. It doesn’t mean that there will be defaults, but you will have declining returns for investors. “


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