With the Triangle experiencing the most new apartment construction of any period since 1997, its hard to drive around the region and not run into an active construction site.
But theres one place in the Triangle where you wont find a frenzy of activity. Of the 9,712 units under construction in the Triangle as of March, just 103 were in Chapel Hill, according to Karnes Research and the Triangle Apartment Association. And those units are to be student housing.
Long known as one of the more expensive and bureaucratically challenging places to build, Chapel Hill is not seeing the rise in vacancy rate and slowing rent growth that is beginning to take hold in areas experiencing significant new inventory.
The towns vacancy rate in March was 6 percent, the second-lowest of any market in the Triangle behind Hillsborough and 1.6 percent points below the entire Triangle. Chapel Hill also had the highest average monthly rents in the Triangle at $1,002, up 3.6 percent compared to March 2013.
Among those making big bets on the Chapel Hill apartment market is Eller Capital Partners, a 2 1/2-year-old firm that has acquired three properties for nearly $50 million since October. All three of the properties The Apartments at Midtown 501, 86 North Apartments and Timber Hollow Apartments boast occupancy levels of above 96 percent, according to Karnes and TAA.
Daniel Eller, the Chapel Hill firms president, said the three purchases reflect a shift in strategy for the company as institutional buyers drive up the cost of acquiring newer communities.
The market has changed since we started in 2011, obviously, said Eller, who worked for the brokerage firm Multi Housing Advisors before launching his own firm at the end of 2011. ... Its made it difficult to buy newer product in good markets. The returns that we generally want to see just arent there.
Eller of late has been focused on buying well-located older communities in Chapel Hill and Charlotte that need to be updated. Two of the Chapel Hill properties Eller bought were built in the mid to late 1980s, while the third dates back to the early 1970s.
Eller is now in the process of making $15 million in improvements to the properties, installing new appliances, improving the tenant amenities and making the units more energy efficient. Last week, the company received approval from the Chapel Hill Town Council to expand Timber Hollow, including adding 14 affordable housing units.
Eller said his firm is a long-term owner. As for the possibility of more construction in the future in Chapel Hill, the pipeline isnt entirely dry. Four projects, including 300 units at a University Square redevelopment project on Franklin Street, have been proposed as of March.
You have some, but its nowhere near what it is in Raleigh, Cary and Durham, Eller said.
As for concerns over whether the Triangle market is headed for trouble given all the new construction, Eller said its important to note how this building boom is different from the one that occurred in the middle of the last decade.
That was generally suburban apartments, garden-style, this time around its more urban, downtown locations. midrise type developments, he said. I think its a little bit different because of the different products being offered. I think there is demand to fill it. I think it may be a little bit slower because of the volume coming online.
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