Multifamily permit activity appears to have plateaued at levels well above historical norms, suggesting the U.S. apartment construction volumes could ease over the next year.
In August 2016, a total of 32,500 multifamily units were approved for construction by local governments nationwide, according to the U.S Census Bureau. That monthly figure was up 2.8% from July 2016 but down 3.6% from August 2015.
With August’s authorizations, a total of 370,000 units have been permitted since September 2015. That 12-month measure is down 13.1% from the annual total a year ago.
At the end of 3rd quarter 2016, more than 555,000 apartment units were under construction in the top 100 U.S. metros. That figure, up 16.5% from August of last year, was roughly 90% higher than the 20-year average.
Though permitting volumes appear to have plateaued, the nation is experiencing an interesting shuffle in metro rankings. Perhaps most noteworthy is San Diego, which made an uncharacteristic appearance on the monthly leaderboard in August. The market, with 1,044 units approved, saw a 933.7% spike from August 2015. The jump in permitting volumes appears due to increased developer interest in San Diego’s downtown area.
Meanwhile, Dallas/Fort Worth, which led for July’s permitting volume, ranked #3 for that measure in August. The market approved 2,177 units, a decline of more than 30% from the same month in 2015.
Dallas/Fort Worth’s year-to-date figures proved more durable. The market maintained its #2 ranking, with 16,728 approvals in 2016 through August. Dallas/Fort Worth, with 7.8% year-over-year growth, experienced the only positive change of the three recurring frontrunners – New York, Dallas/Fort Worth and Los Angeles.
Year-to-date permit numbers for New York slipped 67.6% against August 2015. The disparity is largely a result of developers rushing to obtain permits ahead of tax incentive 421-a’s expiration in June 2015. The artificial inflation is expected to drive down year-over-year figures through the remainder of 2016.
Other metros have also seen declining permit volumes: Los Angeles, Miami, Seattle and Houston experienced year-over-year declines for August.
Behind New York, Houston noted the second sharpest drop. The Texas market approved 6,221 units, a -56.9% change from the year-ago figure. Developers in Houston are increasingly conservative with starts, in response to energy sector turmoil and aggressive completion volume.