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The single family home market isn’t the only real estate market in Albuquerque upended by the coronavirus pandemic.
In fact, most real estate segments are experiencing unprecedented trends, including the “very hot” multi-family housing market.
Albuquerque’s rental occupancy rate sits at about 95.8% – just above the recommended healthy occupancy rate of 95%, according to a Yardi Matrix report in February,
Some of the increase in renters may be fueled partially by previous and prospective homeowners pushed out of the housing market, Josh Rogers, Titan Development senior vice president of development told the Journal.
Rogers said that, while the real estate industry was temporarily paused for a few months in early 2020 due to the onset of the pandemic, it quickly shifted into overdrive with an onslaught of demand for housing thanks to such factors as lower interest rates.
“It’s really been an exciting time for multi-family because the demand has never been higher, but, at the same time, you’re seeing it stretched out in the market,” Rogers said.
Alan LeSeck, Apartment Association of New Mexico executive director, said the current market is “very hot,” due partially to the lack of apartment development dating back to before the pandemic.
‘Not keeping up’
Since 2013, and prior to 2020, LaSeck said Albuquerque was averaging about 500 new units a year, below what the city needed to accommodate new residents.
“It doesn’t take a lot to move the needle,” he said. “… We just haven’t been keeping up with … the amount of building that we’ve needed to do over the years.”
Both LaSeck and Rogers said that there is a national lack of overall housing, and Albuquerque is not immune.
Home prices in Albuquerque continue to reach record highs, with the current median home value sitting at $315,000, up by 18.9% compared to a year prior, according to the February Greater Albuquerque Association of Realtors report.
The increase in home prices might mean that some people are priced out of the market, Rogers said. Anecdotally, he said he has heard of people who have sold their homes only to be unable to purchase another home due to increasing costs or a lack of availability.
Some would-be home owners are also left renting since home values have increased at such a drastic rate, he said.
These former and would-be home-owners are then pushed into the rental market, increasing the occupancy rate and affecting renters, Rogers said.
Higher rental costs
The high occupancy rate also means that rental costs have increased due to higher demand and lack of supply, he said.
“It doesn’t take a lot to tip the scales,” Rogers said.
In Albuquerque, the average apartment is rented for $1,170 per month, according to RentCafe.
Though rents have increased, LaSeck said it’s possible that the new construction currently happening, and planned in the near future, will help decrease, or at least stabilize, rent prices.
However, he said, it will still be quite some time before many of the new projects are available for rent.
All of these changes have pushed some developers to pursue more multi-family builds than they had done pre-pandemic.
“There’s a ton of construction going on,” LaSeck said. “2021 and 2022 will probably be record-breaking years for construction.”
Among the leaders of multi-family development is Titan Development.
The company is currently working on three multi-family developments totalling more than 500 units.
Demand ‘very strong’
It is also working on the largest multi-family development in construction with the 281-unit Allaso High Desert apartments at San Antonio and Tennyson Street.
The projects, located mainly in the Northeast Heights, were planned well before the pandemic changed the rental market, but the company is looking at more multi-family developments in the future due to the changing market.
“We intend to complete more projects and deliver more units to Albuquerque … to help alleviate the shortage in multi-family,” he said. “But the demand is very strong right now, and there’s just a lot of people seemingly moving to Albuquerque and … we’ve got to provide places for these people to live.”
LaSeck said that, for every 10,000 new residents, there needs to be about 3,400 apartments since about 34% of people typically rent.
Some of Titan’s new developments, such as the Allaso Vineyards at Holly and Ventura, target an aging demographic that may be looking for a new place to live with less maintenance than a single family home.
Residents in older demographics making a move to apartment living may also help a little with the housing demand, he said.
“So, is it going to be a monster swing in the market? Absolutely not, but hopefully it provides a couple of opportunities for some homes to go on the market as people downsize and make those decisions,” Rogers said.
Project pipeline growing
He said he anticipates that more builders will move toward multi-family options.
“You’re going to see a lot more projects because that demand is just pretty remarkable at this point in time,” Rogers said.
Other companies are also following the demand by beginning new multi-family buildings.
In Albuquerque, about 2,000 units across 12 properties are under construction, with an additional 2,485 units planned across 16 properties and 5,143 prospective units, according to Yardi Matrix.
Among the larger developments is Overture Andalucia, a new multi-family complex on Albuquerque’s West Side aimed at adults 55 and older.
The 171-unit complex, owned by the property investment, development and management company Greystar, is set to have units ready by this fall, according to the company.
Goodman Realty is also moving forward with construction on multi-family housing this year for the first time since the ’80s, Goodman Realty vice president Scott Goodman said.
Though the company is working only on a single 207-unit building this year, it is looking at continuing forward with that type of development, he said.
“We’re looking at doing more apartments,” Goodman said. “… Apartment rents have really skyrocketed, apartment construction costs have really skyrocketed, and I think that the supply of apartments is really going down, and that’s part of the reason you’re seeing what we’re seeing … and the city needs more apartments.”
He said the company’s plans to build Lofts at Winrock in Albuquerque’s Uptown area predated the pandemic, but the increased demand for apartments has led the company to look at other areas to pursue multi-family development, such as near the Journal Center.
Goodman said multi-family housing could be particularly attractive to developers since it is seen as a less risky investment and it is also easier to finance.
More development, he said, could also lead to lower rental costs and help with the affordability problem.
“The more apartments we have, the more supply we have, the more affordable it should be,” he said.