Lack of financing and high vacancies killed speculative development during the past two and a half years, says Rene Circ, director of research for New York City-based real estate development analyst Grubb & Ellis.

“New speculative projects have been started in 2011 in a few markets, but the total square footage is not even a tenth of one percent of total inventory,” says Circ.

Growing demand this quarter for rental apartment buildings follows several quarters of sagging activity and a growing wariness among potential homeowners to take on mortgages in the present economy, says Linton.

New York State of Mind

Forest City's massive tower at Eight Spruce Street, New York City, an $875-million, 903-unit project, is nearly completed. The building represents one of the largest residential projects in the nation. Started more than four years ago, leasing is under way for the lower-level units of the 85-story, Frank Gehry-designed tower.

“[The units are] leasing out nicely because there is pent-up demand since 2008, when markets went down, and that's driving the current demand in New York for multifamily apartments,” Linton says.

The recession's dampening of mortgage lending has spurred “a subtle demographic change as we see a generation of potential homebuyers who are becoming renters by choice,” says Linton.

In the positive outlook for apartments, “we are clearly in a phase of the recovery where concessions are burning off and apartment owners can register real rent growth,” says Hessam Nadji, managing director of New York City-based analyst Marcus & Millichap.

The national apartment vacancy rate in the first quarter registered 6.2% and is projected to fall to 5.6% by the end of 2011. “In our estimation, the next three to five years for apartments will show the strongest rent growth of any recovery period that we have seen,” says Nadji.

The rental-apartment markets are relatively strong “despite the overhang of economic uncertainty, high unemployment and market volatility,” says David J. LaRue, Forest City president and chief executive officer, pointing to the firm's major projects currently under way. These jobs include a 220-unit apartment tower in Denver and mixed-use development anchored around the Barclays Center Arena in Brooklyn, N.Y.

The firm also has broken ground on several bio-tech projects, including an eight-building, 2.3-million-sq-ft bio-tech park at the Massachusetts Institute of Technology in Boston, and bio-tech projects in Baltimore, Skokie, Ill., and University Park, Pa.

The auto industry is keeping Jackson-Shaw busy this year. The company is developing a training-center complex for combined tenants Chrysler Group LLC and Nissan North America, Irving, Texas.