IRR-Raleigh Mid-Year Viewpoint 2015 Local Market Report - Multifamily
Overall, the multifamily market in the Triangle region of North Carolina remains relatively healthy. The urban areas are entering a phase of hyper supply that exceeds inventory levels required by demographic projections for the next five years. Developers are counting on the continuing paradigm shift for tenants to seek urban apartment options with walkability to work and other support services. The Raleigh and Durham CBD areas are relatively late bloomers in comparison to other major metro areas in the region and the apartments are being constructed to support the overall urban growth effort occurring in both cities.
Employment growth in the region is strong and rent growth has remained constant even as new supply has been added to market to-date. Vacancy rates will likely climb to 15% to 20% as the new urban Class A product is released to market but this figure will be skewed by the number of properties in lease-up. The effective vacancy should remain closer to 10% to 15%.
Absorption rates for new properties continue to average 15 to 20 units per month according to conversations with leasing agents. We anticipate that effective rent growth will slow in the urban areas as considerable new inventory is released. Suburban rent growth will be impacted less as the new supply as a percentage is not as alarming. Sales activity in the region remains strong and investor pricing of assets shows little indication of concern regarding the new supply. Capitalization rates remain low suggesting that the region is perceived as a low risk with significant growth potential. The Triangle region will continue the over a decade long trend of strong positive absorption and will absorb the new inventory over the next three to five years.
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IRR Mid-Year Viewpoint 2015 comprises a National Overview report and 300+ two-page Local Market Reports for all key property types as well as additional resources, including metrics methodology, graphs, and tables; these free reports may be downloaded from IRR’s site here.