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Apartment units are being built at record pace, with The Wall Street Journal (WSJ) reporting that “builders are on track to finish more new apartments in 2020 than in any year since the 1980s.” There will be roughly 371,000 new rental units throughout the country to hit the market this year; a 50% jump over the number of new units completed in 2019.  

Developers have now shifted their focus to luxury buildings, hoping to bring in business from the more affluent.   Some 80% of the new units will be considered luxury apartments, or “Class A properties” as the industry describes them.  

“Land prices are expensive. It is very difficult financially to make sense of building a cheaper product,” said Cyrus Bahrami, a managing director of Houston developer Alliance Residential – which owns several luxury rental buildings. 

Interestingly, some believe a luxury building boom can be beneficial to the less affluent, for as the wealthier move into these newer units, that supposedly frees up “more affordable homes for less wealthy apartment hunters,” claims WSJ. 

While the focus may be on “luxury,” some companies are hedging their bets and building more affordable homes, which will offer fewer amenities and will rent out at about 25% less.  However, the gap between luxury properties rent prices and these more affordable units is widening.  

“High-end building rents are now on average $500 a month higher than the next class down, up from roughly $300 a decade ago,” advises WSJ. “That spread is even greater in Los Angeles, where a luxury apartment is an extra $800 a month.”  

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To read the full piece in the Wall Street Journal, click here: https://www.wsj.com/articles/aiming-at-wealthy-renters-developers-build-more-luxury-apartments-than-they-have-in-decades-11579084202 

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