WASHINGTON (MarketWatch) Home builders and investors have poured money into so many new rental units that tenants may see rent growth slow in the near future, one economist said.

While there will likely be robust demand in 2015 from renters and young adults, in particular builders have already started and plan to start enough new apartment projects that the days of excess demand may soon be over, said Ryan Severino, senior economist at Reis, a New York-based research firm focused on commercial real estate.

Demand will struggle to keep pace with the significant amounts of new construction that should come online over the next few years, Severino said.

Growth in rents over coming years should remain positive, according to Reis, but it will likely slow from 2014s heady pace of about 3.5%, which far outpaced overall consumer inflation.

Although an improving labor market with more jobs and faster wage growth should provide landlords with more leverage to increase rents, over time this will be stymied by the sheer number of new units that are going to come online, increasing competition in the market, Severino said.

The frenzy for apartments has been fed by a choppy jobs market that made it tough for workers to set aside enough cash for a down payment. Also, persistently high credit standards have kept singles and families from obtaining a mortgage, a key financial ingredient for many would-be homeowners, particularly first-time buyers.

Seeing an opportunity, developers ramped up apartment building. The rate of private construction spending on new multi-family residences was up 27% in November from the year-earlier pace, more than double a 13% gain for new single-family homes, according to government data. Meanwhile, outstanding multifamily-mortgage debt swelled in the third quarter, rising the most since the end of 2007, the Mortgage Bankers Association said Tuesday.

Rental vacancy rates are the lowest in 20 years, which gives landlords power to raise rents. Government data show that landlords recently ramped up rents by the fastest pace in six years. But that power may taper as the supply of rental units rises.

With a veritable deluge of new supply set to come online over the next few years, vacancy is headed higher. The supply pipeline swells larger and larger on a weekly basis and presents the greatest risk to the apartment markets health, Severino said.

Read more here:
Capitol Report: Apartment glut may tame rising rents

After all, last year saw the most apartment construction since 2001, with 161,518 new units delivered, according to Reis. Cities like Houston, Austin and Washington, D.C., are seeing an apartment boom, which could start to ease rising rents.

"We work in an industry that has a huge propensity to overbuild." Severino said. "I don't think it's going to be a massive overbuilding, but I do think even with demographics so favorable it's going to be difficult if not impossible for demand to keep pace with supply."

Read MoreOffice sector works its way back

Still, landlords are able to collect higher rents, which rose 3.5 percent in 2014, the best performance since 2007. Rents are setting new records, and the improving labor market, including faster wage growth, will give landlords at least in the short term more leverage to raise rents.

"It is surprising, and an outlier, to have a strengthening fourth quarter when everyone is going home for the holidays," said Alexander Goldfarb, an analyst with Sandler O'Neill. "Rent (price) growth in 2014 surprised everyone."

But as developers start to see too many cranes in major urban markets, they are now setting their sights, too, on the suburbs, where there has not been a building boom and where potential returns are far higher.

Both Avalon Bay and Essex Property Trust are starting to focus their investment dollars on the suburban markets. Essex, which is concentrated on the West Coast, is especially well-positioned.

"Housing is unaffordable in San Francisco, so Essex has been capitalizing on the fact that rent growth has been tremendous," Goldfarb said. "In their development projects, the yields have been way above what they expected."

On the flip side, multifamily real estate developers who also invest on the East Coast, like Equity Residential, are finding the competition from condominium developers in New York City fierce. Both land and labor are now so expensive that the numbers don't work.

Read MoreManhattan apartment prices hit record high

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Will too many apartments pinch the rental market?

THE WAY IT WAS: Here is a photograph of the Kingston Court apartments taken on a snowy day in 1944 by Gordon Feinberg. Ground was broken for the construction of the apartment complex at 203 S. 16th St. on Jan. 8, 1924. A group called the La Crosse Apartment Co., made up of Louis Meier, Hugo Hickisch and Harry Mandel, were the original owners and directed the construction of the building. The apartments were modeled after another apartment building constructed previously in Minneapolis. Cost of the project was approximately $100,000, or about $1.4 million in todays economy. A grand opening for the new building was held on May 17 to May 19, 1924. The apartments boasted built-in ice boxes, steam heat, janitor service and hot water year-round. Local furniture stores such as Gantert Bros. were brought in to temporarily furnish some of the apartments to demonstrate to prospective renters how nice the apartments could look and perhaps provide the local furniture stores with some business.

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Hometown history: Kingston Court apartments

(Reuters) - Britain's construction sector grew at its slowest rate since July 2013 last month, industry data showed on Monday, though house building remained robust, with residential construction enjoying its strongest year since at least 1997.

The Markit/CIPS construction purchasing managers' index fell to 57.6 in December from 59.4 in November, still comfortably above its long-run average but well below economists' forecasts of a slight decline to 59.0.

Readings above 50 denote growth.

The weakest sector was civil engineering, which reported an outright fall in output for the first time since May 2013, while the rapid rate of growth in house-building eased slightly to its lowest since June 2013.

Britain's housing market has cooled since the middle of the year, with mortgage approvals falling to their lowest in more than a year and house price growth slowing.

But Markit said 2014 still marked the best year for British house building since it started collecting records in 1997, news likely to cheer the government which has made boosting this a priority in the run-up to May's national election.

"While new business growth moderated to its lowest for a year-and-a-half in December, UK construction firms are still highly upbeat about their prospects for output growth in 2015," said Tim Moore, senior economist at Markit.

The survey also showed signs that wages might be starting to rise in the sector, with rates paid to subcontractors growing almost as rapidly as November's record-high pace.

Economists are forecasting that after several years of falling real wages, 2015 might bring the first widespread increase in pay since the 2008/09 financial crisis.

Construction makes up 6 percent of Britain's economy. A similar survey of the manufacturing sector published by Markit on Friday also showed slower growth.

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UK Construction PMI Falls To Lowest Since July 2013: Markit/CIPS

Maybe Arana Hankin, the state official in charge of Atlantic Yards, and Jane Marshall, a Forest City Ratner executive, should take a relatively brief evening walk from their Fort Greene homes to check out the deafening construction noise at the intersection of Fourth Avenue and Pacific Street.

Marshall recently likened the additional stretch of overnight noise to a dentist's appointment that would be over in a month.

But that's not quite right.

It's probably closer to a long-term dentist's visit without any novocaine. After all, one resident of 568 Pacific Street described it as "torture."

At that building on Monday night, inside a hallway, a visitor registered a 94.0 dB reading on a decibel meter, as shown in the photo at right.

That's way, way off the charts.

(Update October 14: This noisewas related to worknot under the direct control of Forest City Ratner, but is related to Atlantic Yards.)

Measuring impacts

The upper acceptable limit at night, according to the city and state, is 65 dB, which itself is way above the recommended level of 45 dB, as noted below.

But there's no evidence anyone officially involved in Atlantic Yards has tried to monitor this, or to offer promised mitigations (see below). Hence my suggestion above.

Original post:
Atlantic Yards/Pacific Park Report: Construction noise ...

A sharp slowdown in government-built schools and infrastructure caused U.S. construction spending to fall slightly in November.

The Commerce Department said Friday that construction spending slipped 0.3 percent in November, after having climbed an upwardly revised 1.2 percent in October and 0.6 percent in September.

Much of the decline came from a 1.7 percent retreat in government expenditures. Publicly-built school spending fell 2.5 percent, while the transportation, health care and public safety sectors also fell.

Private construction spending rose a modest 0.3 percent in November. Home-building climbed 1 percent in November, offsetting the declines in the office, commercial and health care-related construction.

Total construction spending has improved a mere 2.4 percent from a year ago to $974.9 billion.

Construction activity has lagged broader economic growth for much of 2014, hampered by limited gains in homebuilding. Few potential buyers can afford new homes, a reflection of meager wage growth, tight credit standards and builders focused on pricier housing developments that are beyond the financial reach of most home-seekers.

Residential construction spending declined 0.5 percent over the past 12 months to $352.7 billion, although solid gains in the past two months suggest that homebuilding activity likely helped economic growth in the final quarter of 2014. Analysts at the bank Barclays projects that annualized growth in the October-December quarter will be 2.8 percent, a solid increase but down from an annualized gain of 5 percent in the third quarter.

Modest buying activity has dissuaded builders from breaking ground on more homes. Sales of new homes dropped 1.6 percent in November to a seasonally adjusted annual rate of 438,000, the Commerce Department said in a recent report. That second straight monthly decline leaves home construction significantly below the annual rate of 700,000 that was common in the 1990s.

Still, broader economic growth should help to bolster construction. Employers have added 2.65 million jobs through the first 11 months of 2014, the most in 15 years. Each new paycheck helps to increase consumer spending, even though average wages have yet to meaningfully outpace inflation. The job gains have accompanied faster economic growth during the second and third quarters of 2014.

"As the labor market continues to show improvement and wages increase, especially for young adults, we expect the pace of single-family building to pick up this year," said Anika Kahn, a senior economist at Wells Fargo.

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US construction spending down 0.3 pct. in November; government building activity leads decline

Apartment dwellers in New York, San Francisco and Boston often pay more in rent than average Americans spend on monthly home-mortgage payments.

Is it time to add Denver to that list?

Perhaps, if you are talking about the 34-story glass luxury apartment tower near downtown Denver that is a venture of PM Realty Group and partner National Real Estate Advisors LLC.

If all goes as planned, the new building, called the Confluence, would be Denver's tallest apartment building with some of its most expensive apartments.

The developers are aiming for an average rent of $2,800 on their 288 units in a city where the average apartment rents for $1,110 a month and the average home mortgage also is in that range, based on current rates. The units in the new building will range from $1,500-a-month studios to two 3,500-square-foot three-bedroom penthouses that will go for $12,000 a month.

"We're looking for people who want to live in a highly amenitized building with tremendous views, close to all the action and an ultraluxury lifestyle," says Roger Gregory, president of PMRG Investments, a unit of PM Realty Group.

PMRG says it studied Denver's economy to determine whether there are enough well-heeled residents who could afford rents the company plans to charge at the Confluence--so-named for its location at the intersection of the South Platte River and Cherry Creek.

"When you look at Denver, you got a highly educated workforce," says Mr. Gregory, who points out that the city has a disproportionate share of white-collar jobs.

In the greater Denver area, professional-services jobs comprise 21.1% of its total employment, 4.7 percentage points higher than the national average, according to a recent report by the Bureau of Labor Statistics.

Petroleum engineers, who earn $72.84 an hour, are Denver's highest wage-earners, and employment in the energy sector, which includes mining, logging and construction, has grown 3.8% in the 12 months ending in October, according to the BLS.

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Denver Rents Soaring Mile-High

The four biggest projects receiving building permits from Champaign and Urbana in 2014 were all student apartment complexes with three of those going up along Green Street.

While Green Street appears ripe for more development in 2015, watch for more student apartments to take shape along University Avenue.

Already, the Campus Circle Urbana complex is rising in the 1000 block of West University Avenue in Urbana.

Farther to the west, the Latitude apartment complex is expected to be developed on the north side of University Avenue between Fifth and Wright streets in Champaign.

Plus, buildings have been cleared at Fourth and University and at Third and University, ostensibly to make way for new developments there.

The six biggest student apartment projects for which permits were issued this year will add 625 apartments to the mix. Most of those apartments will have more than one bedroom, so it's projected the six complexes will have a total of about 1,900 beds.

The tallest of the new projects is HERE, a 16-story apartment building at the northwest corner of Fourth and Green streets in Champaign. When finished, it will have 143 apartments on the sixth through 16th floors and a total of 528 beds. It will have an automated parking system on the second through fourth floors and a fitness room and outdoor patio on the fifth floor.

"HERE is topping out the concrete structure, and interior work is well underway," according to JJ Smith, the chief operating officer for Chicago-based CA Ventures (formerly Campus Acquisitions), which will own and manage HERE.

CA Ventures will also own and manage West Quad, the apartment complex being developed on the south side of Green Street just east of the Canadian National railroad tracks in Champaign.

"At West Quad, the two-level parking deck along the tracks is built, and the apartment (section) on top of it is framed up three additional levels," Smith said. "The town homes around the grand courtyard have begun to be framed as well."

See the original post here:
Rooms with a view top 2014 building projects

The construction crews have not yet topped off what soon will be the tallest building in the city's downtown and already four new projects are either approved or in the pipeline to reach that high.

The 12-story apartment building, the Mark at CityScape, is scheduled to open early next year near the southeast corner of Palmetto Park Road and Federal Highway.

Officially, downtown Boca's buildings are supposed to go no taller than nine or 10 stories that measure 100 feet, plus some height for decorative elements.

But under temporary rules, the city is allowing builders to construct taller buildings downtown if certain design guidelines are met.

The Mark at CityScape was approved in 2012 to reach 12 stories at 140 feet or 40 feet taller than the official height limit for downtown. When the building opens next year, the city plans to re-evaluate whether such taller buildings are ideal for Boca Raton.

The other four planned or proposed downtown projects:

Construction has started on the 366-unit apartment complex, Via Mizner, at the corner of Camino Real and Federal Highway. It, too, will reach 12 stories.

The City Council in September approved a hotel for the southeast corner of Palmetto Park Road and Federal Highway. The plan calls for 12 stories. It will be right next to the Mark at CityScape.

Next month, a representative for Tower One Fifty-Five will ask the City Council for permission to have it rise three stories higher than the nine stories for which it has been approved. The development will be in the 100 block of East Boca Raton Road.

A fourth proposal, for another 200 apartment units, could reach 13 stories at 300 S. Federal Highway.

Read more:
As Boca allows taller downtown buildings, more in line for new heights

The owner of the Colony Apartments in SouthPark on Monday filed a rezoning request to allow a $400million mixed-use redevelopment of the site, which could add more than 1,100 homes, a 300-room hotel and a new grocery store.

The 27-acre tract of land at Sharon and Colony roads is currently home to the 353-unit Colony Apartments. Charlotte-based Synco Properties and Schlosser Development Corp. of Austin, Texas, said the new development would better serve the area with a mix of residential, retail and office uses.

Frankly, we believe the redevelopment opportunity offers a lifestyle more representative of what wed like to offer residents at the Colony, Tim Hose, president of Synco, said in a statement.

Synco has owned the apartment complex for 38 years. But there are major infrastructure repairs needed, including settling foundations and burst pipes underground, the company said in a news release. The apartment complex would be torn down to make way for the new development.

A public hearing on the rezoning proposal is likely to be held in early spring. The companies have launched a website, http://www.thecolonyredevelopment.com, to provide information about the development and the schedule for community meetings.

Building the new development, which would rival nearby Phillips Place and Piedmont Town Center in size, could begin in early 2016.

The companies said the first phase of construction would include about 300,000 square feet of retail space along Sharon Road and a five-story building at Colony and Roxborough roads with 350 multifamily units. The retail center including a potential grocery store could open by early 2017.

The companies say they would base the decision to start the second phase on demand. That could include a 10-story office building with 250,000 square feet of space, more multifamily housing and a 300-room hotel. A third and final phase would follow. Total development would take five to six years, Synco and Schlosser said.

In total, the redevelopment plans call for:

1,100 residential units, a mix of apartment and for-sale.

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Apartment owner files for major SouthPark-area rezoning