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Slowing Permit Volumes in Large Metros Suggest Apartment Construction Leveling

Slowing Permit Volumes in Large Metros Suggest Apartment Construction Leveling

While national multifamily permit levels remain above historical norms, development volumes in large metros suggest apartment construction activity could level out.

In September 2016, a total of 41,000 multifamily units were approved for construction by local governments across the country, according to the U.S Census Bureau. That monthly figure was up 21.0% from August 2016 and 18.8% from September 2015. With September’s authorizations, a total of 290,800 units have been permitted during 2016. That year-to-date count is down 13.5% from one year ago.

An observation of major markets suggests national permit volumes could continue to ease in the coming months. Sixteen of the 50 largest U.S. markets saw year-over-year declines for year-to-date figures. Pittsburgh led that roster, with a 67% drop. The Steel City appears to be normalizing after years of supply outpacing demand.

New York trailed Pittsburgh, slipping an unsurprising 62.9%. 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. The second largest metro, Los Angeles, also experienced a decline. The West Coast hub saw year-to-date authorizations decrease 10.7% from September 2015.

Apartment Market Data

Across all metros in September 2016, leaderboard players for actual year-to-date numbers remained largely unchanged from recent months.

Apartment Permits

Monthly figures proved more of a shakeup, with August 2016 front-runners like Miami, San Diego and Portland falling off the top-10 list. Phoenix joined the ranks with 1,518 new permits, a spike of nearly 300% over the same month in 2015. San Francisco registered equally impressive growth. The metro authorized 1,330 units, an increase of more than 200% over September 2015.

Apartment Construction

At the end of 3rd quarter 2016, 561,100 apartment units were under construction. That figure was down 0.9% from a year ago, according to MPF Research data.

According to a separate Census report, a total of 279,000 multifamily units started construction through September 2016. That figure is 5.6% fewer than in the first nine months of 2015.

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