The Multifamily Development Cycle Finally Peaked Last Year

After a prolonged growth period following the Great Recession, the multifamily development cycle may finally be nearing its end.

This year is projected to be the first since 2011 in which fewer apartments will deliver than in the year before, according to a Yardi Matrix study as reported by RentCafe. After 317,872 apartment units delivered nationwide last year, 282,931 units are expected to come online by the end of 2018.

Despite the slowdown, the three-year period ending in 2018 will have seen the most deliveries of any such timeframe since 1983-1985, when 909,816 units were delivered. Such a high number means that 2019 is likely to see another decline in deliveries as developers finally take a breath.

Because of the multi-year timeframe associated with apartment buildings, there may be an elevated number of construction starts that translate to another uptick in deliveries further down the line. Population growth in urban areas persists and demand for multifamily housing remains strong.

The New York metro area will see the most apartment deliveries this year of all markets, according to Yardi Matrix, with nearly 20,000 units expected to come online. The metro has added 46,000 residents in the past year.

In second place is Dallas-Fort Worth, which is expected to deliver 17,132 new units this year while its population has grown by over 146,000 in the past year, according to RentCafe.

The slowdown in development could keep rent growth from tapering off, especially in pricey markets such as San Francisco, where only 6,647 units are expected to deliver this year. Rents have increased 2.3% nationwide so far this year, the second straight year of slowing rent growth. But rental rates have yet to truly decline since the depth of the recession in 2010.