Markets & Economy

Rental high-rise developers bank on 2017 absorption, exits

Gateway cities, some secondary markets to see new multifamily projects

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A significant percentage of multifamily developers have made a pact to avoid high-rise projects moving forward, citing costs, construction timelines, site availability and lease-up risk; however, a small consortium will break ground on towers during the second half of 2015. Gateway cities and, surprisingly, some secondary markets will be the locales of high-rise projects that receive financing and start before year’s end. In major metros like New York City, Miami, San Francisco, Chicago and Washington, D.C., developers that start towers in the coming months may have a condo exit in mind -- a situation where a condo converter will purchase the property when it delivers in mid-2017. In secondary markets, a condo exit is unlikely. In these situations, developers are more likely to view these projects as longer-term holds or projects that will sell to an owner/operator for $200,000 to $300,000 per unit in several years. Minneapolis appears to be an active market when it comes t...