The Varsity is being constructed near East Washington and South Division streets in downtown Ann Arbor.
Melanie Maxwell | AnnArbor.com
Michigan-based financial media outlet Benzinga posed that question in an article on Tuesday, where it called Ann Arbor a “developers’ dream city,” but also said the market, particularly for high-end student apartments, is in danger of becoming over-saturated.
Several “luxury” student apartment buildings have been constructed near downtown in recent years, including Landmark, 4-Eleven Lofts, Zaragon Place, Zaragon West and City Place. Meanwhile, The Varsity is under construction near East Washington and South Division streets, and City Council is debating a proposal for a 14-story high-rise at East Huron and South Division.
The article says the capitalization rates at these buildings — or the premium that a buyer pays over the property’s operating income — reached a 20-year low in Ann Arbor during the fourth quarter of 2010. However, cap rates have been rising since that year.
“All of the new development is raising fears that the city will soon become overdeveloped and also will jeopardize the existing architecture of the city that gives Ann Arbor the small town feel that it once had before the university grew to its current size,” the article says.
Lizzy Alfs is a business reporter for AnnArbor.com. Reach her at 734-623-2584 or email her at lizzyalfs@annarbor.com. Follow her on Twitter at http://twitter.com/lizzyalfs.