Written by | Tom Rosman
I get asked one of the following questions at least once a week:
- “When does the apartment market slow down?”
- “When do we stop building all these apartment buildings?”
- “Is the apartment market in a ‘bubble’?”
These are all valid questions that I spend a lot of time thinking through. There are a lot of metrics to be considered, but as I talk to property managers about the outstanding demand they are enjoying, I can only come to the realization that Richmond’s apartment market is in a stable place.
I’ve recently had conversations with five different property management companies (Dodson, Genesis, Legacy, Landmark Property Management, and Great Richmond Rentals, who manage a combined excess of 10,000 units in the Richmond area) who are all experiencing extremely strong occupancy levels and have enjoyed robust activity during the normally slow first quarter. This is highly unusual: The apartment rental market is typically seasonal and the winter months tend to be extremely slow.
From a pricing perspective, this atypical demand is driving lease rates higher and all of the managers expect the 2nd and 3rd quarters (normally the prime rental season) to bring an even tighter market.
The large developments recently opened – the Depot (the old GRTC bus depot), Shockoe Valley View, the Locks, and the Square – all filled up faster than the developers projected.
Recently released data shows that the City of Richmond’s population increased by 3,542 people last year for a 2016 population estimate of 233,170. By raw numbers, Richmond had the biggest population gain of any city in Virginia and third biggest gain of any locality in Virginia behind only Loudon and Prince William counties.
We have all seen the growth in recognition Richmond has been receiving in many national and international publications – Conde Nast, Southern Living, Newsweek, and Forbes, to name a few – who have all positively reviewed our food, art, and music scenes. Similarly, Richmond has been included in ranking such as best weekend getaways, best places to live, best places to retire, and best place to get a tattoo (yes, that is something that people rank…). Richmond is one of the “it” places in the country now and it promises to continue to gain recognition and notoriety. People, particularly the younger millennial population, are going to keep moving to Richmond.
Are apartments being built at a remarkable rate? Yes. We’re seeing a bevy of apartments being constructed in many of Richmond’s most popular neighborhoods, with little sign that this trend will subside anytime soon. But to say that they’re being overbuilt is to underestimate just how much demand has increased.
The old Richmonder remembers a radically different Richmond than the one that exists today, which tends to skew their opinion of the development momentum. Gone are the days of crime and blight in our urban core, replaced by an undeniable renaissance driven by architecture, walkability, culture, entertainment, and a host of world class dining options.
Assuming that the market is getting overbuilt simply because the number of new apartments seems large ignores the fact the the city’s population is growing at the fastest rate in nearly 50 years. The development we are seeing functions to match this demand shift, not exceed it.