Multifamily Permitting and Starts Show Continued Strength

Despite record apartment completion volumes, multifamily developers aren’t done with the cycle yet, as permitting and starts continued to rise in the latest monthly data.

According to the latest U.S. Census figures, multifamily permitting on a seasonally adjusted annual rate (SAAR) totaled 421,000 units in the year-ending May 2018. Although down 8.5% from April’s rate, the annual figure was 9.1% greater than May 2017. This was the third consecutive month exceeding 400,000 units and the ninth in the past 12 months.

Regionally, multifamily permitting rose by almost a third (31.1%) in the Midwest and increased in each of the other three regions. The West saw a 7.0% increase in May, while the Northeast was up 5.7%. At 3.2%, the South region had the smallest increase in seasonally adjusted annual multifamily permits from last year.

Annual multifamily starts also surpassed 400,000 units for May, at 404,000 units. That start volume was up 11.3% from April and 27.4% from May 2017. Multifamily starts appear to be elevating from average annual levels seen in 2016 and 2017. For the first five months of 2018, the average of annual multifamily starts by month is 401,000 units, compared to the 346,000-unit average for all of 2017 and 379,000 for 2016. Whether the volatile multifamily market maintains this level through the year or tapers somewhat, remains to be seen.

Warmer weather has allowed multifamily starts in the Midwest region to soar, doubling from April’s annual rate to 108,000 units and four times the rate of May 2017. Multifamily starts rose modestly in the South (2.0%) and by about a third in the Northeast (30.2%), but fell by 8.3% in the West.

At the metro level, nine of last month’s top 10 permitting metros remained the same, and the top four were in the same order. Atlanta moved into the #10 spot, knocking Phoenix out of this month’s top 10.

Multifamily market data services

Several of the top 10 markets experienced increases in annual multifamily permitting from last year as Charlotte, Portland, Austin and Washington, DC each saw permitting jump by more than 20%, or roughly 2,000 units to 4,000 units each. Denver, Los Angeles and Atlanta declined from their previous year’s pace, while Dallas was nearly even.

Other markets with at least 1,800 more multifamily permits issued than last year include Oakland, Nashville, San Diego, Fort Worth and Boston. In addition to Denver (-1,737 units), significant slowing of 1,500 or more units occurred in Tampa, Kansas City, Minneapolis-St. Paul and Chicago.

The annual total of multifamily permits issued in the top 10 metros – 144,407 units – was 6.1% greater than the 136,046 issued in the previous 12 months. The total number of permits issued in the top 10 metros was almost equal to the number of permits issued for the #11 through #36 ranked metros.

The list of top individual permitting places – cities, towns, boroughs and unincorporated counties – generally include the principal city of some of the most active metro areas. The city of Los Angeles led the nation for the year-ending May, followed by Charlotte’s Mecklenburg County. The cities of Austin, Seattle and Portland round out the top five.

Apartment market data

The city of Los Angeles has consistently held the top spot of permitting places for more than a year with about 11,000 units to 12,000 units permitted annually.

The District of Columbia and the city of Fort Worth fell out of the top 10 permitting places from April, replaced by the city of Chicago and the borough of Brooklyn. The city of Dallas has moved up the list into the top 10 within the past three months.