developers are building a lot of new apartments. But demand is more than strong enough to absorb the new supply, according to the latest from leading apartment analysts.
“We are having a very stable recovery. Our fundamental look very positive, very strong over the next seven, eight, ten years,” says John Sebree, vice president and national director of the national multi housing group for Marcus & Millichap.
The apartments in the first wave of new construction are already opening their doors. Developers will finish an estimated 145,000 new units of multifamily housing this year. That’s well above the level new construction over the last few years. So far, demand for apartments is easily absorbing the new supply. The percentage of vacant apartments remains hovers at just 4.7 percent, according to Marcus & Millichap.
Developers continue to start construction of new apartments that will probably open two years from now—though the volume of these new projects started this summer is slightly less than researchers anticipated.
“The market is self-correcting, somewhat,” says Stephanie Sutton, research manager for Axiometrics Inc. June was an especially slow month—developers started construction on just 13,566 units. That’s a steep drop from January when developers started work on more than 22,000 units, according to Axiometrics’ count, which includes just conventional rental properties with more than 50 units. Construction has hardly ground to a halt, however. Starts were back close to 20,000 again in July.
“Multifamily starts tend to be pretty volatile,” says Mark Obrinsky, senior vice president for research and chief economist for the National Multi Housing Council. The long-term trend shows developers starting work on more and more apartments as the economy recovers. Obrinski counts the number of apartments developers started building over the last 12 months, without a seasonal adjustment. In August, that number reached 227,500. “You have to go back to October 2008 to see a number that large,” says Obrinsky. “We continue to gradually increase the volume of new construction.”