From the front page of the Daily Gazette:
Demand for apartments remains high
By Bethany Bump May 4, 2015
CAPITAL REGION — An improving economy and rising rents aren’t convincing Capital Region residents to buy homes. In fact, demand for new apartments is expected to outpace an already lively new-construction market in the coming years, according to the U.S. Department of Housing and Urban Development.
Federal officials expect demand for nearly 2,700 new rental units in the region over the next three years, with the greatest need in Saratoga County. A comprehensive housing market analysis of the region by HUD, the first of its kind since 2005, found that the 1,450 apartments currently under construction in the region should be enough to satisfy more than half that demand.
The places that will need to keep building if they want to meet demand are Saratoga and Albany counties, the report found. Demand is expected for 1,050 new units in Saratoga County and 980 new rental units in Albany County. About 40 percent of the demand in Saratoga County and about 50 percent of the demand in Albany County should be met by construction projects currently underway in these markets.
“The [Saratoga County] submarket was formerly a bedroom community for surrounding counties,” the report notes. “But it has transitioned in recent years into a live-work location with new garden apartment communities in southern portions of the submarket and mid-rise rental options in the urbanizing city of Saratoga Springs.”
Apartment projects currently in the works in Schenectady, Rensselaer and Schoharie counties are expected to fully meet demand in those areas, HUD says.
However, recent events may change the dynamic in Schenectady: The state chose a site in the city as one of three sites for casinos in upstate, and the casino would create 1,200 new jobs.
The news has caused a stir in the local housing market, with real estate agents saying they’re getting more calls than ever for showings and landlords taking to Craigslist and other sites to market their apartments as “just down the road from the new casino!” Schenectady County has seen an uptick in closed home sales and pending sales in recent months, but activity this time of year is usually credited to the change in seasons.
HUD broke the region down into three submarkets for its analysis: Albany County (home to the state Capitol), Saratoga County (one of the fastest-growing counties in the state) and what it calls the Mohawk River submarket, which comprises Schenectady, Schoharie and Rensselaer counties.
Federal officials describe the rental market in this Mohawk River submarket as slightly soft, with the lowest rents and highest vacancy rate (7.4 percent) of the submarkets. Rents are still on the rise in these counties, though. As of the second quarter of 2014, the average monthly rents were up about 2 percent in both Rensselaer and Schenectady counties to $968 and $886, respectively. Market-rate apartment development is uncommon in Schoharie County, where about 60 percent of renter households have four or fewer units.
Apartment projects in these counties also tend to involve adaptive reuse of old buildings more than in Albany and Saratoga counties. In addition to new construction, adaptive reuse developments in the cities of Troy and Schenectady have added at least 140 units to the multifamily inventory since 2000.
As the economy improved and downtowns were revitalized, these counties issued permits for nearly twice as many rental units in 2013 as they did in 2012. But that increase appears to have satisfied most of the estimated demand for 660 new rental units over the next three years, HUD says.
“In addition to the 540 apartments currently under construction or being converted from nonresidential buildings, an additional 320 apartments are likely to begin construction by the end of 2014, which is expected to satisfy the remaining demand in the submarket,” the report notes.
The HUD analysis used data from 2000 through June 2014.
Local officials have described demand for apartments in downtown Schenectady as voracious in recent years. Developers have been building mixed-use buildings featuring retail on the first floor and residential on the top floors at sites along Broadway, Union and Barrett streets, Liberty Street and in the lower State Street and historic Stockade neighborhoods. One of the bigger projects — a $20 million housing and retail development on lower State Street — is set to break ground later this year and will feature 105 luxury apartments.
Schenectady County Metroplex Development Authority Chairman Ray Gillen said demand for apartments downtown remains high and doesn’t seem to be quenched just yet, but he conceded that there’s not a ton of room in the county to build mega-apartment projects like those in Saratoga County.
“Our towns are also very selective,” he said. “They want the right kinds of projects. But we are seeing demand, especially for nicer apartments and upscale units.”