Almost 205,000 units delivered over the four quarters ending March 31, 2016, a 2% annual increase, including 46,000 units added during the seasonally slow first quarter. With more than 240,000 units expected to deliver across the top 54 U.S. markets this year, CoStar projects 2016 to be the peak year in the current cycle for new apartment construction.
More than a half a million units are under way across the country, nearly twice the historical average since 1982.
While fewer apartment units are projected to be built next year, the construction wave isn't expected to recede quickly. Another 220,000 units are projected to be built in 2017. If that holds, 2017 would be the fourth consecutive year that annual new supply exceeded 200,000 units, the first such period of extended building activity since Ronald Reagan was in the White House.
The large number of new units reaching completion this year and next started construction in 2015. According to U.S. Census Bureau data, quarterly construction starts of apartments have fallen over the past two quarters after peaking in third-quarter 2015 at more than 112,000 units. While starts in the first quarter were below the historical average, quarterly permit data suggests apartment-building may trend back up over the remainder of the year.
Year to date, multifamily starts have fallen 2.3% from the same period in 2015. However, the Commerce Dept. provided evidence of an uptick on Tuesday, reporting that starts of multifamily buildings with five or more units, including apartments, townhouses and condominiums, rose by 10.7% in April.
While the new construction accounts for a large number of units, it accounts for about 4.5% of U.S. apartment stock today, and is therefore considered to have a much more manageable impact today than 30 years ago, when the supply of new apartments peaked at nearly 9% of total apartment stock.
As with most real estate trends, there will be variance from market to market. For example, apartment construction is expected to have a more noticeable impact in certain markets where the new supply represents a much larger percentage of total inventory, such as Nashville and Charlotte, NC.
Rents still moving up; demand spreads to the suburbs: read the full article HERE.