This story was originally published in Multifamily Executive.
Apartment completions reached a 30-year high in 2017 and beat the 2016 level by 30 percent, according to RealPage.
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, RealPage notes. 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.
Absorption Focus
Despite record-high supply volumes, absorption across the top 150 markets essentially kept pace, RealPage says, holding steady at 95 percent. However, the data firm adds, 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.
Here’s RealPage's look at how absorption in Houston and Nashville, Tenn., fared last year:
While high by historical standards, new supply in Houston was absorbed relatively well. Absorption here was bolstered toward the end of the year by displaced residents who turned to apartments in the wake of Hurricane Harvey. Also notable was the completion volume in Nashville. There, a total of 9,893 units were delivered last year, causing a steep annual occupancy decline in 2017 as operators struggled to fill all of the new units.
2018 Outlook
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. RealPage counts new supply as developers finish units and push them into the leasing pool, a shift from previous calculations that counted new supply once all the units in a property were completed.
Construction volume also dropped significantly, to 382,000 units at the end of 2017, RealPage says, a decline from the peak of 478,000 units early in the year, indicating that the annual completion volumes "had peaked for the cycle.”
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