Supply glut forces UDR to revise NYC growth expectations

Denver-based resi REIT "beginning to feel the impact" of new Manhattan units

808 Columbus Avenue UDR
808 Columbus Avenue on the Upper West Side (inset: Jerry Davis)

Real estate investment trust UDR is starting to feel the supply squeeze in the Manhattan residential market. On a first-quarter earnings call Tuesday, COO Jerry Davis noted that an expected influx of new apartments through 2017 forced the company to revise revenue growth projections.

Davis said the Denver-based residential REIT is “beginning to feel the impact from the new supply in the Manhattan market.”

That new supply consists of 25,000 new apartments slated for delivery through the end of this year and “even higher” deliveries of 30,000 new units in 2017, Davis said, adding that the influx is “directly related” to the now-defunct 421a tax abatement program and developers looking to get into ground before the program’s expiry at the start of this year.

While noting that job growth within the New York market is expected to remain “robust” through 2017 and that new development “should decrease significantly” in wake of the current supply glut, Davis said UDR had revised its revenue growth expectations for its New York rental portfolio “down to about 5 percent,” or 50 to 60 basis points below original projections for this year.

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The REIT also said it is projecting its 2017 revenue growth figures for New York to be “moderately lower than in 2016,” also attributing that to the “continuing pressures of new supply.”

UDR’s New York City portfolio represents 12 percent of the company’s total net operating income, With Its Rental Assets Including 95 Wall Street in the Financial District and the Columbus Square complex on the Upper West Side.

Davis cited third-party data indicating that nationwide apartment operator could expect unit supply to “peak this year” in every one of its markets “with the exception being New York City.”

New York is also the only market UDR operates in “that will experience a higher number of deliveries in 2017 than in 2016,” the REIT said.