Multifamily development remains very active nationally and near peak levels for this cycle.
The 261,200-unit completions total in 2019, however, represented a 5.8% decline from 2018. While the 2019 total is the lowest four-quarter total in three years (since Q3 2016), it is still 7.5% above the five-year average (252,300 units).
CBRE Econometric Advisors forecasts the four-quarter totals to rise over the course of 2020, reaching a new cycle peak of 348,000 units by Q4 2020. After that, CBRE EA projects completions to gradually decline
CBRE Multifamily Research anticipates 2020 completions to closely mirror the totals reached in the past two years – high 200,000s. Both permits and starts were high in 2019, and the pipeline of under-construction units reached a new peak in January 2020 (674,100 units). Completions are likely to fall some in 2021, but not dramatically.
Construction momentum varies significantly by metro, however. The extent to which industry players should be concerned about completions and potential oversupply varies greatly by metro (and by submarket).
Tier I Completions Drop 9% Y-o-Y
Tier I markets, as a group, had the largest year-over-year decrease of multifamily completions among the three tier groups (-9.2%).Construction slowed more moderately in Tier II and Tier III markets, overall, with completions declines of 4.3% and 0.2%, respectively. However, within all tier groupings, the markets exhibited significant variation.
Completions Count Rises Most in Houston
For the 66 markets analyzed, completions for 26 markets were higher on a year-over-year percentage basis in 2019, more than one-third of the total.
Another 31 markets had lower levels of multifamily deliveries. Completions were essentially stable in 9 markets.
Among all markets, absolute gains on a year-over-year basis were largest in Houston (4,400 units), Miami (2,000), Newark (1,900), Long Island (1,700), the Inland Empire (1,700) and Atlanta (1,700).
The largest percentage increases in multifamily unit completions among Tier I and II markets were in Long Island, the Inland Empire, Houston, Newark and San Francisco. All of these markets experienced increases of 60% or more.
The leading Tier I and II metros for smaller delivery totals were San Jose, Orange County, Los Angeles, Charlotte and Nashville, all with declines of more than 30%.For Tier III metros, Lexington, Greensboro, Tulsa, El Paso and Salt Lake City experienced the largest percentage gains. Many of the gains, however, were off a very low base, but are notable nevertheless.