Apartment completions reached a 30-year high in 2017 and beat the 2016 level by 30 percent, according to a report in Multifamily Executive.
Last year, 364,713 units were completed in the 150 largest U.S. metros, more than doubling the long-term average and growing the U.S. apartment stock 2.1 percent.
The peak in completion volume was driven by 15 metros where construction has been particularly active in urban core areas. Those 15 metros contributed roughly half of the nation’s new units in the past year.
Overall, the most units in 2017 were completed in Dallas (25,104), New York (22,666), and Houston (20,759). Annual completions totaled about 10,000 to 16,000 units in the typically high-supply markets of Washington, D.C.; Atlanta; Seattle; Los Angeles; Chicago; and Austin, Texas.
Despite record-high supply volumes, absorption across the top 150 markets essentially kept pace, the report stated, holding steady at 95 percent. However, operators have reined in their pricing strategies in an effort to fill new units. For the nation overall, rent growth clocked in at 2.6 percent. That’s down from the roughly 4 percent to 5 percent increase common from 2014 through 2016.
The apartment market is expected to see supply volumes ease in 2018, according to RealPage. Deliveries for the year are scheduled at around 330,000 units, down from the 2017 peak but nearly double the historical norm.
Construction volume also dropped significantly, to 382,000 units at the end of 2017, a decline from the peak of 478,000 units early in the year, indicating that the annual completion volumes “had peaked for the cycle.”
In related news, the U.S. apartment vacancy rate increased marginally in the fourth quarter of 2017 from the third as supply exceeded demand, according to a report from Reis Inc.
The national apartment vacancy rate rose to 4.5 percent from 4.4 percent, the real estate research firm said.
Vacancy rates increased in 50 of 79 metros, with New York City and Washington, D.C. hitting their highest-ever rates of 5.1 percent and 6.6 percent, respectively, the report said.
Reis said it expects vacancies to rise in 2018 before tapering off in 2019 as projects slated for completion will continue at least over the next 12 months.
