Letter: How many apartment buildings are too many?
“Is Grand Rapids in the midst of an apartment building bubble?” “Who is going to fill all of these units that are being built?”
These are questions I hear almost daily. From meetings with lenders to neighborhood meetings on development-related topics, it is the topic du jour. It is impossible to drive around town without passing a building under construction or an existing building under renovation, and with new projects being announced virtually weekly, these are valid questions.
Instead of answering the above questions based on speculation, I tasked my team with compiling the data to answer them based on numbers. Here’s what we came up with: The Grand Rapids area is the fastest growing metro area in Michigan. From 2010-15, Grand Rapids experienced population growth of 3.7 percent, according to the U.S. Census Bureau. Over that same time period, developers added about 2,000 new units, or an average of roughly 400 apartment units per year. This number has increased significantly in recent years. In 2015 and ’16, there will be roughly 1,600 new units added, or 800 units per year. This number doesn’t show signs of slowing down, either. Our company is tracking projects that have been proposed and/or currently are under construction, and there are well over 2,000 new units in the pipeline through 2018.
As stand-alone numbers, those are a lot of new apartment units. But, consider this: As of Sept. 23, the city of Grand Rapids has 37,509 registered rental units within the city limits based on city community development and code compliance figures.
Even if 1,000 units are added yearly, that is only a 2.6 percent increase in the total rental housing stock. With population growth closer to 4 percent, market vacancy at around 3 percent, strong millennial demand and a growing population of baby boomers selling their homes and moving back to urban centers, it’s no wonder rent in Grand Rapids has increased an average of 23 percent since 2011.
Perhaps the more pertinent question is: Are we building enough units?
Beacon Realty Group