A national real estate report suggests that rents and the demand for apartments will contract due to oversupply, but the message for Greater Des Moines is that there is plenty of room to grow.
That's the perspective of Kyle Gamble, managing director at CBRE|Hubbell Commercial, and Kris Saddoris, vice president of development at Hubbell Realty Co. And who could argue with their vantage point, having drawn investors into a market where Hubbell Realty is building and renovating multifamily properties at a nearly fevered pace.
"Occupancies are high, and there has been significant pent-up demand and an undersupply of apartments provided to the market," Gamble said.
Real estate research firm Reis Inc. said yesterday that rents could rise 3.3 percent this year nationwide, roughly the same as in 2013, as the most construction in a decade boosts vacancies and limits landlords' ability to increase rates more.
Reis said vacancies in Greater Des Moines stood at about 2.4 percent at the end of the third quarter; that would be down from the 4.2 percent vacancy rate reported earlier this year in CBRE|Hubbell Commercial's annual market survey.
"I think there has been an improvement in that number," Gamble said.
The demand for apartments has been fairly stable in the metro area for 40 years, he said, reaching a high of 9.5 percent vacancy rate in 2004.
And the market has changed dramatically since 2004, when "if you were breathing, you could buy a home," Saddoris said. Now, Hubbell projects are seeing renters in their mid-30s in the suburbs. That is a change from the days when the rental market was dominated by younger people.
Lenders are following more stringent underwriting standards, and the market is full of "renters by choice," meaning that more people have decided that they would rather rent than own as a lifestyle decision, Saddoris said.
"The point is that since 1971, the market hasn't seen any significant vacancies. That is a good story to tell to investors ... particularly if an investor is in it for the long term," Gamble said.
In addition, apartment development will stay in check because of lenders who allowed "every developer with a dream" to borrow money in the buildup to the recession, he said.