In recent years, the soft job market and the uncertainty about the local economy have kept many people in the Cleveland area from buying new homes. Instead, they opted to rent. That’s why apartment vacancies in the metro area reached one of the lowest levels of the last decade in 2012.
Marcus & Millichap reports that apartment construction in the Cleveland area has now reached a five-year high, as many developers have sought to take advantage of the low vacancy levels. Last year, 550 units were completed, with builders expected to deliver 750 units this year. Apartment construction projects seem to be springing up like mushrooms after the rain.
According to The Plain Dealer, on Feb. 7, the Cleveland City Planning Commission approved rezoning for a roughly four-acre residential development at the edge of Tremont and Ohio City, as well as the conceptual plans for an apartment project in the city’s Detroit-Shoreway neighborhood. Together, these two projects will deliver 500 units close to the city’s downtown. But they will require additional public hearings and community meetings before construction can start.
Another project, in Cleveland’s Ohio City neighborhood, took an even larger step toward construction. Crain’s Cleveland reported that the U.S. Department of Housing and Urban Development notified the developers of the $20 million W. 25th Street Lofts on Feb. 7 that it had approved a $14 million loan for the project. Construction is expected to start in April, as soon as financing is secured.
Plans call for the redevelopment of the former Baehr Brewery at 1526 W. 25th St. into more than 60 apartments. The project offers an opportunity for dense development in a largely single-family neighborhood and will help meet the need for additional housing units in the area.
According to Marcus & Millichap, the weak job market and the rising inventory will lead to an increase in apartment vacancy this year to 5.8 percent. However, vacancy will remain moderate in comparison to the five-year period prior to the recession. Rents will also advance 1.3 percent to $808 per month in 2014. With many of these projects located close to employment districts, attracting tenants shouldn’t be a problem, as companies look to hire more people to fill positions.
Charts courtesy of Marcus & Millichap Real Estate Investment Services.