The Real Deal New York

End of boom-times: The impact of a looming slowdown in the multifamily market

A decrease in construction may mean higher rents
November 13, 2018 09:30AM

Apartment buildings under construction in New York City (Credit: iStock)

A decade-long apartment boom may be coming to an end.

Federal data shows that multifamily building permits have declined every month since March, suggesting that apartment construction could slow in the next two years, the Wall Street Journal reported. According to the latest Census Bureau data, permits were pulled to build 351,000 units in new properties with at least five units in September. That represented a 9 percent year-over-year decrease.

Such a slowdown would likely ease concerns about oversupply and could mean rent increases for tenants.

Developers added 347,000 apartments across the U.S. last year, which contributed to rent growth that weakened from 5 percent in 2014 to 2.9 percent in the third quarter of 2018, according to RealPage, a real estate analytics company.

On the West Coast especially, developers are struggling to complete projects due to a shortage in labor. For example, 2,000 rental units that developer Equity Residential expected to deliver this year will instead be completed in 2019 due to a shortage of construction workers in Los Angeles.

“The demand is there,” Paula Munger, the National Apartment Association’s director of industry research and analysis, told the Journal. “But labor’s a big deal. It varies by position, but in general that’s what we’re hearing from our members. The actual completions are being more and more delayed for that reason.” [WSJ] — Kathryn Brenzel