Looking to rent an apartment in the Huntsville area? You don’t have to look far.

Huntsville’s apartment boom has led to an oversupply of units in the fast-growing metro area, according to a recent report.

More than 6,500 units were completed in the metro area (not including Athens) last year, according to a Berkadia-Crunkleton report. That figure matches the total number of apartments delivered in the metro over the 12 years leading up to 2020.

“Our occupancy rates here were higher than most occupancy rates across the country for three years straight,” Crunkleton Commercial Real Estate land specialist David Wilson said. “And our rent growth was also one of the highest in the country for about three years. Those were two of the things that triggered the increase in developers’ attention. We got ahead of ourselves. We were in a severe housing shortage (because of the area’s explosive population growth).”

Although there are still a lot of units still in the pipeline, Wilson said new construction is slowing almost to a halt because of the oversupply.

“You don’t have the construction starts that we used to,” Wilson said. “What we’re doing is finishing up the properties, the things that have started or are under construction. Some have delivered and (are) leasing units. There are 19 that haven’t delivered anything yet.”

And Wilson said there are some developers who are sitting on sites that haven’t started anything yet.

That reflects what City of Huntsville Director of Urban and Economic Development Shane Davis told the Huntsville City Council last year, saying his office had seen a “drastic drop-off” of apartments being proposed for the Rocket City.

“Huntsville is currently overbuilt with apartments, and until that excess supply is absorbed, we’re going to see a slowdown in new multifamily construction,” Realtor Matt Curtis added. “We’re seeing the effects of oversupply—one to two months of free rent incentives, declining rents, and higher vacancy rates. That’s not a climate where developers are eager to build.”

“Occupancies are down, values are down, expenses are up,” Wilson said, noting those are some of the metrics developers use in determining whether to start construction.

Wilson said the occupancy rate is in the low 80% range.

According to the Waller, Weeks and Johnson Rental Index at the Alabama Center for Real Estate at the University of Alabama, the average rent in Huntsville as of March was $1,426.99 per month. That is down from $1,595 in December 2023.

Still plenty of units in the pipeline

Huntsville residents may not notice the slowdown, at least not immediately, because there are still plenty of units coming online.

“We’ve got 32 (complexes) in our pipeline that are under construction,” Wilson said. “Some have already delivered some units. Some haven’t, about 7.400 units.”

More than 5,100 units are expected to be delivered this year.

Wilson said they’ve got 50 apartment complexes actively leasing units. “They have not stabilized yet. That is a combination of properties that have been finished for over a year and are still not stable and other ones that are nearly finished, plus everything that is under construction that is delivering units.”

Wilson said apartment construction is occurring now throughout the Huntsville metro area.

“Downtown does get a lot of attention, but if you look at (Cummings) Research Park, that’s one of the highest concentrations,” he said. “Town Madison has a high concentration. Clift Farm has a high concentration. Out on Highway 72 East, there’s been a high concentration. There’s concentrations and pockets of major development all the way across the area.”

Although luxury apartments have been getting a lot of attention with the openings of Vista at Councill Square in the downtown area and 2020 at Providence, Wilson said apartments being built are diversified.

“It ranges from your four-story structure park, like in downtown and Providence, to your one-story cottage style (build to rent),” Wilson said.

The build-to-rent variety is a new phenomenon. According to the Berkadia-Crunkleton report, Huntsville ranks seventh nationally with that type of multifamily development. Other studies have Huntsville easily outpacing other areas in the state with that type of construction.

Slowdown only temporary?

Oversupply isn’t the only reason apartment construction is slowing down in the metro. Both Wilson and Curtis cite what is going on nationally as also being a factor.

Wilson said historically low interest rates just a few years ago helped ignite the boom, but said the capital markets across the country effectively froze about two years ago when interest rates increased and changed the value dynamics of apartment properties and most commercial real estate.

“That was the trigger that really stalled out new construction for most new properties across the country that were not already started,” he said. “You really haven’t seen this historically, we haven’t seen this much of a slowdown in decades. We’re starting to thaw out. There’s been a reset of expectations and attitudes.”

Curtis said apartment construction won’t bounce back until the oversupply clears.

“Right now, there’s too much product on the market, and too many developers are missing their financial targets,” he said.

But Wilson believes it will bounce back because of the population growth in the area.

“It will pick back up again,” he said. “It’s just a matter of when. What’s going to need to happen in the Huntsville market is occupancies are going to have to improve. And they will, over the next year and a half to two years. I think we will get back to the stable occupancy rate, which will be 90% or higher. As that’s happening, we’re going to start having higher rents.”