- Associated Press - Thursday, December 25, 2014

ST. LOUIS (AP) - The St. Louis region could be headed for a glut in upscale apartments.

The St. Louis Post-Dispatch (https://bit.ly/1vdZ3B9 ) reports that after a long dry spell that resulted from the housing bust of 2008, St. Louis is seeing an uptick in construction of multifamily buildings, both condominiums and apartments. The region is also seeing an increase in rehabilitation of existing apartment buildings.

But there are those who worry the trend may good too far, and that too many luxury projects are planned.

“There’s a lot of new construction on the drawing boards. It’s kind of unprecedented,” said Kirk Mills, president of Mills Properties, which owns or manages more than 9,000 apartments around St. Louis and is building in the Central West End and St. Peters.

“We’re going to see the top of the market tested over the next few years. There will be some people who really get in trouble,” Mills said.

The rental market research firm Reis Inc. says rents are up 2.7 percent in the region over the past year, while vacancies are down to 4.5 percent. Vacancies were at 9 percent in 2009.

Ryan Severino, senior economist at Reis, said the fall in vacancies is dramatic and has turned St. Louis into a “solid landlord’s market.”

But incomes are growing slowly, so rents are not increasing as fast as they might, Severino said.

“People have to be able to afford it,” Severino said. “It’s not out of the kindness of their hearts that landlords are not increasing rents more than they are.”

Multifamily rehab permits in St. Louis city jumped to 3,632 in the first 10 months of this year, compared to 2,115 in the same period last year and 1,176 by October 2012, according to the Home Builders Association of Eastern Missouri.

Mills and Tim Sansone, principal at the Sansone Group, a property development and management firm that runs 5,000 apartments in Missouri, Arkansas and Texas, worry about what may be next. Both believe another 1,400 to 1,500 apartments are on the drawing boards. Most will be in the high-rent zones, Mills estimated.

But the luxury end is a “thin market,” Mills said.

“You’re going to have all this stuff delivered, mainly at the same time,” he said.

In Clayton, developers have plans for nearly 900 new apartments in four projects going through the approvals process.

Mills Properties is building City Walk, a 177-unit apartment building with a Whole Foods Market on the first floor, in the Central West End of St. Louis. Mills is also finishing a project in St. Peters.

He doesn’t plan to build more.

“We’re kind of battening down the hatches and focusing on operations,” he said.

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Information from: St. Louis Post-Dispatch, https://www.stltoday.com

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