The Apartment Market Is Hitting a Construction Lull
October 03, 2023
Many of the cranes crowding skylines from Phoenix to Denver and Dallas will soon come down. They are likely to stay down for a long time.
The number of new apartments starting development has fallen dramatically this year, a consequence of higher interest rates, declining rents and what in some places looks like overbuilding.
Apartment building starts fell to a seasonally adjusted annual rate of 334,000 units in August, marking a 41% decline from the pace seen the same month a year prior, according to the Census Bureau. An annual decline of this magnitude has happened only one other time since the subprime housing crisis, real-estate data firm Bright MLS said.
“We expect to see about two years of greatly reduced building,” said Greg Willett, first vice president at Institutional Property Advisors, a real estate advisory company.
Falling starts come on the heels of record apartment construction across the U.S. More rental buildings are expected to open this year and next than at any time since the 1980s, according to some forecasts.
That crush of new rental supply is driving up apartment vacancies and causing rent growth to flatten or even turn negative in some places.
Now, many apartment builders are hitting pause. They won’t keep laying bricks if expected profits can’t beat safer investments or if too many other buildings are already coming on line.
Read the full story in The Wall Street Journal
The number of new apartments starting development has fallen dramatically this year, a consequence of higher interest rates, declining rents and what in some places looks like overbuilding.
Apartment building starts fell to a seasonally adjusted annual rate of 334,000 units in August, marking a 41% decline from the pace seen the same month a year prior, according to the Census Bureau. An annual decline of this magnitude has happened only one other time since the subprime housing crisis, real-estate data firm Bright MLS said.
“We expect to see about two years of greatly reduced building,” said Greg Willett, first vice president at Institutional Property Advisors, a real estate advisory company.
Falling starts come on the heels of record apartment construction across the U.S. More rental buildings are expected to open this year and next than at any time since the 1980s, according to some forecasts.
That crush of new rental supply is driving up apartment vacancies and causing rent growth to flatten or even turn negative in some places.
Now, many apartment builders are hitting pause. They won’t keep laying bricks if expected profits can’t beat safer investments or if too many other buildings are already coming on line.
Read the full story in The Wall Street Journal
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About Institutional Property Advisors (IPA)
Institutional Property Advisors (IPA) is a division of Marcus & Millichap (NYSE: MMI), a leading commercial real estate services firm in North America. IPA’s combination of real estate investment and capital markets expertise, industry-leading technology, and acclaimed research offer customized solutions for the acquisition, disposition and financing of institutional properties and portfolios. For more information, please visit www.institutionalpropertyadvisors.com.