As developers flood Baltimore with apartments in response to what they see as an insatiable appetite for new residences, the numbers raise a question: Are there too many?
Just over 5,600 residential units, mostly apartments, were under construction in Baltimore and 1,800 more were approved as of April, according to the city's planning department. Another 1,400 units opened just last year, as major projects such as 10 Light St., ICON Residences at the Rotunda, The 501 near the University of Maryland, Baltimore, and the first phase of Remington Row opened their doors.
Yet the U.S. Census Bureau estimated that Baltimore lost 6,700 residents in the year ended July 2016, pushing the city's population to a 100-year low.
While developers say they aren't worried, some wonder whether Baltimore's apartment market may become overbuilt. Thousands of new apartments require thousands of tenants — math that seems like a stretch for a city that's seeing population decline, said Owen Rouse, a senior vice president at Manekin.
"I don't want to say it's an unreasonable number, but it's an awful lot," Rouse said.
The flood of new apartments already has had an impact on rents in and around downtown, according to MPF Research, the research unit of real estate data company RealPage.
Effective rents for new leases slipped 0.4 percent in 2016, said Greg Willett, RealPage's chief economist, in a video report on Baltimore's market earlier this year.
"Pricing power... tends to be weak in the urban core, which has gotten enough new supply throughout this cycle to dampen rent growth," Willett said.
SVN RealSite, a Baltimore real estate brokerage, expects rental rates to decline slightly and vacancy rates to rise, especially around downtown and the Inner Harbor, where many of the largest projects have been concentrated, said Tony Casalena, the firm's managing director.
"I guess the best way I'd describe it is it's maybe cooling down a little bit," he said. "A sensing of things steadying off somewhat."
Facing a glut of apartments, apartment managers typically compete for tenants with lower rents, concessions and other incentives.
Concessions such as reduced rent or a free month create an environment where competitors often feel they must follow suit, Rouse said. While good for renters, downward rent trends generally indicate a soft market.
"It's the whole cable company thing — you threaten to cancel and they throw you something to sweeten the deal," Rouse said.
William H. Cole IV, president of the Baltimore Development Corp., said he isn't worried about that happening because the projects being built in Baltimore are diverse, designed with different tenants in mind and at a variety of price points.
What's more, properties are springing up across the city, rather than being concentrated in one neighborhood.
"We were underserved in terms of diversity and I think we're just now catching up," Cole said. "I think I would be more concerned if it was one type of product, but we're seeing all types."
To name a few: There's 414 Light Street, a 392-unit luxury apartment building going up at the corner of Light and Conway streets. About 260 affordable and market-rate apartments are under construction as part of the first phase of Center\West, a 33-acre redevelopment in Poppleton. Roland Park Place is adding 60 apartments to its senior community north of Hampden.
Anthem House, the 292-unit luxury apartment building in Riverside, won't open to tenants until June, but in the three weeks since the leasing office opened, 50 people already have signed up, said Toby Bozzuto, CEO of the Bozzuto Group.
With an acre of green space on its roof, a pool, fitness center and apartments with high-end finishes, Anthem House boasts some of the highest rents in the city. Studios with 540 square feet of space start at $1,695 a month.
Bozzuto said he did not know which size units had been leased or demographics about incoming tenants, but said the faster than expected leasing rate is a good sign for Baltimore.
"It bodes well for our project, but also for the future," he said. "Hopefully it's an indicator of interest in living in Baltimore."
Bozzuto said he thinks hiring among major employers, such as Under Armour, the Johns Hopkins University and the University of Maryland, and a growing network of start-up companies will keep new tenants coming.
Three-quarters of the tenants at Bozzuto's Baltimore properties work in the city and about 40 percent of them relocated from out of state to live here, he said.
While developers say they're still filling space, they acknowledge they're starting to feel the pinch of a crowded real estate market.
ZOM Living recently began leasing for the 349-unit building it is erecting on South Charles Street in Otterbein. The Florida-based developer took into consideration Baltimore's market conditions when setting rents, budget expectations and the timeline for filling the property, called Banner Hill, said Andrew Cretal, a senior vice president for ZOM.
"We understand it's coming," he said. "We understand we have to lease up against a number of new projects."
After opening late last fall, The Vault, a 24-unit apartment building downtown, took longer to lease up than expected, said Greg Kostrikin, a vice president at Poverni Sheikh Group. He partially attributed the lag to opening during what is typically the slowest time of year for move-ins.
But that hasn't stopped the Baltimore developer from pursuing more apartment projects.
Most recently, Poverni Sheikh was selected by the Baltimore Development Corp. to redevelop five vacant, blighted buildings in the 400 block of North Howard Street.
The firm plans to convert the space into a mix of ground-floor retail and 39 market rate units, plus a handful of parking spaces.
In downtown Baltimore, apartment occupancy slid from its historic rate of about 94 percent to 91.3 percent in 2016, as several large buildings, including 10 Light Street and The 501, added hundreds of units to the area, according to Downtown Partnership's annual State of Downtown report.
Kirby Fowler, president of the Downtown Partnership, said he expects occupancy to tick back up as those buildings stabilize.
At the same time, Fowler said it is impossible to predict future demand. While Millennials may age out of their urban obsession, Baby Boomers may seek to downsize into the city.
"Like most economic cycles there's strong points and low points — it's hard to know where you are," Fowler said.
Downtown Partnership is in the process of evaluating the apartment market and expects to release its outlook over the summer.
Cole, of the Baltimore Development Corp., said he thinks the market will determine its own saturation point.
"As soon as lenders stop financing these projects, we'll know we've reached our capacity," he said. "But we haven't reached that yet."
But it could be coming. The Wall Street Journal reported in February that major banks were becoming increasingly cautious in lending for multifamily projects nationwide, pushing developers to invest more money and to borrow from smaller regional banks at higher interest rates.
"We've already seen the pull back and I think right now the pull back is not getting worse, but we don't see it getting materially better," said Mitchell Kiffe, senior managing director at CBRE Capital Markets.
Kiffe attributed the trend to regulatory changes that make multifamily development loans less attractive, rising construction costs and early signs of saturation in some markets. CBRE is tracking what Kiffe described as "pockets of softness" in 10 cities, including New York City, Boston and San Francisco.
Baltimore is not on that list, Kiffe said, but other factors influencing bank lending could affect developers in any city.
"Only the best properties, with the best locations and the best sponsorship are going to go forward," Kiffe said. "I think the projects that were maybe a little more risky or marginal in their economics making sense will be put on hold."
According to MPF Research, the number of units in the Baltimore region's development pipeline — many of them in the city — adds 3.3 percent to the area's supply.
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While RealPage's Willett called that "pretty substantial by local standards," the firm thinks Baltimore can absorb it.
"Our base models for Baltimore's apartment market suggest that the area will be able to handle the additions that are currently on the way," said Cameron McIntosh, a market analyst for RealPage research unit MPF.
Longer-term, SVN's Casalena also expects the market to stabilize, as developers venture further from the downtown area and the state's strong education, health and technology sectors continue to create new jobs.
Competition has been strongest for development projects along or close to the city's waterfront, but increasingly developers are dipping deeper into the city, which Casalena said is a sign of a healthy market.
"I'm optimistic," he said. "I think there are a lot of great things happening in our city that are continuing to drive demand."