Small Markets Nabbed Some Large Apartment Properties This Cycle
The U.S. apartment market has seen one of the biggest building sprees in the nation’s history during the current economic cycle. The average size of a property built during the past decade was a little over 200 units, though there are some that were well over that mark. While most of the largest projects delivered during the past decade have come online in large population centers, a few of the smaller markets also received big developments.
Among those smaller markets is Oklahoma City. The state capital received two large apartment projects early in the cycle and is the only small market to have two of the nation’s largest completions in any of the past 10 years. Developers targeted this metro during an energy boom when oil prices above $100 per barrel fueled local economic growth. Lincoln at Central Park, with 706 units, is the third largest apartment community in Oklahoma City and was the sixth largest project delivered in the U.S. in 2010. The property features a large open mall framed by four-story buildings along each side. Gardner Tanenbaum Holdings developed the community at the southwest corner of IH-44 and Lincoln Boulevard, a few miles north of Bricktown, within the Intown Oklahoma City submarket. About eight miles away is Fountain Lake, a two-phase, 530-unit project that was the nation’s fifth largest completion in 2011. This property, which was developed by As One Group, is located near the intersection of North Eastern Avenue and East Memorial Road in Edmond, within the Edmond/Logan County submarket. The project borders Oklahoma Christian University, where enrollment reached roughly 2,500 students in 2018, and is near The University of Central Oklahoma City, where enrollment totals roughly 17,000 students.
Auburn, AL also saw one of the nation’s largest 10 projects to complete in 2010. The Greens at Auburn was built by Fayetteville-based Lindsey Management Co. Inc. and is a two-story, 600-unit property on a nine-hole golf course off US-29 in South Auburn. It was the ninth largest U.S. property completed in 2010. The Auburn metropolitan area, however, is small – so small that it falls outside of the RealPage top 150 apartment markets. However, it is a growing metro area, anchored by Auburn University and government institutions tied to the university. Auburn University has an enrollment of roughly 30,000 students, and nearly 30% of the metro’s jobs are in the Government employment sector, compared to the national average of roughly 14%. Since 2010, the Auburn metro area’s population has grown an average of 2.1% annually, well above the national average of 0.7%.
Little Rock, AR received a large project in this cycle, also built by Lindsey Management Co. Inc. The Lakes at Hurricane Creek was built in 2011 and was the seventh largest project completed that year. The two-story, 444-unit property is in Bryant, on an 18-hole golf course within the West Little Rock/Saline County submarket. Little Rock serves as the state capital of Arkansas. But with its low cost of living, quality healthcare and scenic landscape filled with outdoor activities, the area has also become an attractive location to retire. Little Rock’s population 55 and older grew 12.7% from 2013 to 2018. While that was in line with the average growth pace in that age cohort nationally, the percentage of Little Rock’s population who were 55 and older grew from 25.1% in 2013 to 27.6% in 2018.
Lindsey Management also recently completed a top 10 project in the Fayetteville, AR market. Walton Crossing, a three-story, 600-unit community completed in May 2019, sits on more than 25 acres along Southeast C Street between Southeast 22nd and Southeast 28th streets in the city of Bentonville. Walton Crossing is 2019’s 10th largest apartment project to complete. Bentonville is the ninth-largest city in Arkansas and is the birthplace and headquarters of Walmart, the world’s largest retailer and the country’s biggest private-sector employer. In Bentonville alone, Walmart employs nearly 17,000 people. The company is currently building a new corporate campus in Bentonville that will be spread over 300 acres, enough space to accommodate its current workforce and room for growth. From 2010 to 2018, the population in the Fayetteville market grew 18%, well above the national average of 5.8%. The market’s population growth has been driven by a surge in the city of Bentonville, which grew nearly 43% from 2010 to 2018. As of 2018, Bentonville’s population stood at just over 51,000 people.
El Paso saw one of the largest developments in the country complete in 2011. Management Resources Development began building Van Horne Estates in 2010, at the same time El Paso’s apartment occupancy rates and annual rent growth levels ranked among the best nationally. Construction on the three-story, 612-unit apartment project correlated with a massive expansion project at Fort Bliss, one of the nation’s largest Army bases. The apartment community, the third largest of 2011, is on Dyer Street just minutes from Fort Bliss and downtown El Paso in the Northeast El Paso submarket. As such, the community was built to cater to military families.
New Orleans made the development leaderboard at #9 in 2013, when Atlanta-based Columbia Residential completed construction of Columbia Parc at the Bayou District. The three-story, 563-unit mixed-income community sits just off Milton Street in Gentilly and was built on the site of the St. Bernard public housing development. St. Bernard was built in the 1940s and 1950s and contained nearly 1,500 units. That development was destroyed by floods during Hurricane Katrina in 2005. New Orleans’ main economic drivers – higher education and healthcare – continue to fuel the economy. New Orleans is a well-known tourist destination, proving a relatively stable economic anchor for the metro. Moreover, the market benefits from a strong shipping port.
Omaha recently made its first appearance to the development leaderboard this cycle at #5 in 2019. NuStyle Development spent $108 million on the conversion of the former eight-story Creighton hospital into 732 apartment units. The Atlas is located on California Street in the Central Omaha submarket and is the state’s largest single structure of market-rate apartments. While the bulk of residents are students or young professionals tied primarily to nearby Creighton University, the community is open to tenants of all ages. In August 2018, about one-third of the units were finished in time to welcome the first residents for the fall 2018 semester. Construction on the remaining units wrapped up in June 2019. Omaha is also home to the large financial institution Berkshire Hathaway and home to Offutt Air Force Base.
For these small markets to receive some of the largest projects in the nation this cycle is somewhat remarkable. After all, small markets have received just a fraction (16%) of the total number of apartments completed this cycle, as developers have primarily targeted big markets with deeper pools of demand. But these small markets with large projects tend to be anchored by stable economic drivers that help to reduce market volatility common in most smaller markets.
However, while these properties were among the largest in the years they completed, they were not among the largest completions of the cycle. The 10 largest completions of the cycle all had at least 850 units and were concentrated in large markets in New York and California.
The largest project to complete in the nation over the past 10 years was the 1,750-unit Los Olivos apartment community in the city of Irvine, within the Anaheim-Santa Ana-Irvine market. Irvine Company built the three-story project near Irvine Center Drive and the San Diego Freeway. The community features a three-acre central park, walking trails, two Junior Olympic swimming pools and views of Irvine Spectrum. Construction on the 100-acre community was completed in 2014.
Los Olivos was not the only large project Irvine Company completed this cycle. In fact, the company had a total of nine completed projects that landed among the annual top 10 list over the past decade. In addition, Irvine Company has another large project scheduled for completion in late 2019. Those 10 projects alone account for roughly 8,500 units. The bulk of those units (6,122 units) came online in the Orange County market, with roughly 5,600 of those units specifically delivering in Irvine. The remainder of Irvine Company’s projects were delivered in the San Jose (1,676 units) and Los Angeles (703 units) markets.
Casa Mira View was one of the nation’s largest suburban apartment developments to be built since the recession. The community is west of IH-15 in San Diego’s Far North San Diego submarket. Garden Communities delivered the first phase of the project with 810 units in 2014. Construction on the second phase with 810 units completed in 2018. And the third phase, which is currently under construction with 228 units, is scheduled for completion in 2020. The community features a children’s play area and carousel, a bowling center, coffee shop, a hair salon and a dry cleaner.
It’s no surprise that the New York market continues to dominate the top 10 this year, with three projects completing in mid-2019. Two of the projects are in Queens: Eagles Loft, a 54-story, 783-unit building and the second phase of Jackson Park, a 53-story, 658-unit building. The third, 420 Kent, was built in Brooklyn and contains 857 units in a 22-story building.