Deliveries Continue—Many Are Conversions
Despite pockets of overbuilding, the South is still turning out the most new units.
Renters are moving more often then ever, many into brand new apartments. And apartment builders are trying to keep pace.
According to the latest report from RentCafe, more than 500,000 new units will be delivered this year. That’s not as many as the record number reaching the market last year, but it’s “significantly higher” than the annual totals recorded in every other years since 2017.
More than half the new units are in the South, with Texas leading the spree. Supported by job growth and economic expansion, the region has become a “migration magnet,” the report says.
As real estate developers know, Southern cities generally offer streamlined approval processes and fewer regulatory barriers, making it far easier to bring projects to fruition. That fact, says Yardi Matrix’s Doug Ressler, a senior analyst and manager of business intelligence, stands “in sharp contrast to the more restrictive frameworks found in coastal gateway markets.”
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At the same time, developers are on pace to turn outdated and abandoned commercial properties into a record 181,000 apartments, “mostly from offices,” RentCafe also reports. In 2024, the strongest year yet for adaptive reuse projects, old schools, churches, office buildings and shopping centers, among other property types, yielded just 25,000 units.
Hotels were the largest source of apartments last year. Over a third of the apartments came from those structures, RentCafe said. But school makeovers skyrocketed, producing four times as many units as in 2023, “by far” the largest increase of any type of conversion.
Office conversions accounted for nearly 5,900 new apartments last year, nearly a quarter of the total.
Manhattan leads the country’s adaptive reuse pipeline, while New York City continues to reign as the market where builders are developing brand new properties.
Manhattan has 11,000 re-use apartments in the works, leading in both future office and hotel conversions. And for the fourth consecutive year, The City leads in new development with about 14,500 units underway, led largely by strong activity in three boroughs—Brooklyn, Manhattan and Queens.
South surpasses all
But more new apartments are coming to the South by the year’s end than any other region. RentCafe estimates that 265,600 new units will be open by Dec. 31. The “unprecedented level” of new apartment construction is “a direct response to the “massive influx” of people and capital heading to the Sunbelt, the report says.
“In fact,” according to the report, “the South has consistently seen the highest in-migrations of any U.S. region since at least 2015, with more people moving in than moving out.” The leading Southern markets include Austin, Phoenix, San Antonio and Fort Myers.
As for the repurposing sector, Chicago has taken over the lead from Manhattan with the largest number of apartment units. A total of 880 units were delivered in the Windy City last year through the conversion process from just four buildings,
Actually, the report points out, Chicago is one of the most active cities in the country when it comes to repurposing outmoded buildings, with any projects in the famed Loop area. Some developers have received government financial assistance to create 1,000 mixed-income units, about a third of which will be in the affordable category.
Only two Southern markets—Dallas and Jacksonville—make the Top Ten list of cities where the most conversions taking place.
Dallas also makes the list of spots where developers of new properties are most active. Almost 29,000 new apartments will be delivered in Dallas by year-end, topped only by New York’s 30,023. Yardi reports.
Austin and Atlanta are next on the list, with 26,700 and 17,500 new units, respectively.
Renters on the move
All this production is coming on line at a time when renters are moving more frequently then ever.
Indeed, another RentCafe study found that renters who move in less than two years make up a whopping 38 percent of all apartment dwellers. GenZers born between 1997 and 2012 are the most frequent frequent movers.
At the same time, a third of all renters stay in their apartments for more than five years. GenXers and Boomers are the most likely to stay put.
RentCafe offers a number of reasons why some people move so often. They include job changes, downsizing and economic uncertainty sending some folks to search out more affordable housing as well as more affordable locations in general.
But, the report also notes that 62 percent of renters renew their leases.
In yet another report, the apartment search engine found that, despite the surge in apartment production, an average of nine renters are out there are competing for the same unit.
That’s the same number as last year. But this year, vacant units take a day longer to rent (39 days in 2024 vs. 40 days in 25).
