A great many apartment properties have been developed in urban-core submarkets -- those densely occupied areas near downtown – in the past four years. An influx of high-rise buildings has changed city skylines, and the sociable, on-the-go millennials who populate these apartments have revitalized downtown and uptown areas that were in need of new housing.
But, though the concentration of construction cranes in the urban core might portray otherwise, more apartment construction is taking place in suburban areas – much to the surprise of many in the industry.
Of course, the definition of “suburban” is becoming fluid, as developers create many large, urban-style employment nodes outside city centers. The “Town Center” concept in many suburbs is an example. They don’t have the walkability, density and urban feel of uptown/downtown areas. But they are attracting developers and renters.
That shouldn’t be a surprise. Though the largest concentration of jobs is downtown, less than one-quarter of those positions are in urban submarkets – the rest are spread out among the many suburban submarkets. Take Dallas, for example. Toyota and FedEx headquarters are moving to West Plano, State Farm anchors a massive development in Richardson and large employment nodes already exist in the Las Colinas area of Irving, in Plano and in North Dallas. Add them to other hotspots such as Frisco, and the total number of jobs outpaces that in the denser downtown area.
So, as the map below shows, the suburbs are a hotbed of apartment construction. Each cluster on the map represents the location of properties built since 2012 in the Dallas area, one of the most active markets for apartment construction.
While an abundance of properties have opened in Dallas’ Uptown and Downtown submarkets, most of the construction is in areas outside of the urban core. In fact, 46,800 of the 56,979 units started from January 2012-September 2015 – 82% -- were in suburban markets.
As you can see, the construction lies along major highways, providing access to downtown offices and attractions. The upper center of the map shows a concentration in the West Plano/Frisco area, where the Toyota and FedEx headquarters are being built.
This trend holds up in most other major markets. Axiometrics studied construction from January 2012-September 2015 for 30 of the top apartment markets in the country. The results showed that 71% of new apartment construction was in suburban areas.
The study also yielded other interesting trends, particularly the rise in starts in urban core areas during 2015, when 32% of the units that began construction through the end of September were in the center city.
Construction has started on more apartment properties in 2015 than in the three previous years.
Of the 810,947 units built since 2012 in the 30 markets studied, 572,972 (71%) are in suburban submarkets, while 237,975 (29%) are in the urban core. By year, the breakdown was 71%-29% in 2012, 75%-25% in 2013 and 73%-27% in 2014, along with the 68%-32% split in the first nine months of 2015.
Suburban construction starts outpaced center-city starts in 29 of the 30 metros, with suburban construction comprising 90% or more of the units in Charlotte, Miami, San Antonio and San Jose. The only markets in which urban starts held the majority were San Francisco (70% urban) and Atlanta (57% urban).
With only one urban-core submarket in most metros – New York, San Francisco and Washington, DC are notable exceptions – the concentration of construction in those areas means they will have more units than individual suburban submarkets; the suburban construction is spread out over several submarkets. So, it stands to reason that eight of the 10 submarkets expected to receive the most deliveries are center-city areas.
Brooklyn, however, which is not an urban-core submarket, still has the most supply identified for 2016 delivery, with 6,350 units expected this year, as of Jan. 10. The Irvine submarket in the Orange County, CA metro, is No. 6.
Atlanta’s Atlanta/Fulton, Houston’s Montrose/River Oaks, New York’s Midtown West, Dallas’ Oak Lawn, Seattle Downtown/Capitol Hill/Queen Anne, and Denver-Downtown are urban-core submarkets most identified supply.
Other suburban/non-urban-core submarkets among the 20 with the most identified supply are the Plano/Allen/McKinney and Richardson submarkets in the Dallas metro, Houston’s Briar Forest/Westchase and New York’s Hudson Waterfront.
Metro areas studied were: Atlanta; Austin; Baltimore; Boston; Charleston, SC; Charlotte; Chicago; Cincinnati; Dallas; Denver; Houston; Indianapolis; Kansas City; Los Angeles; Miami; Minneapolis-St. Paul; Nashville; New York; Philadelphia; Portland, OR; Raleigh; Richmond; Salt Lake City; San Antonio; San Diego; San Francisco; San Jose; Seattle; Tampa-St. Petersburg; and Washington, DC.
