Report: Multifamily construction surge to continue through Q2 2017

Dive Brief:

Multifamily construction is set to increase 10.5% in the fourth quarter of 2016 to 91,957 units from 83,210 in the third quarter, according to a new report from multifamily data company Axiometrics.
The number of new units is expected to remain flat in the first quarter of 2017 and increase in the second, before trailing off in the third and fourth quarters.
Houston is expected to top the list of cities adding the most new units in the fourth quarter at 7,139. Dallas (6,677 units), New York (3,676), Washington (3,256) and Atlanta (3,237) round out the top five. Those five cities are also expected to add the most units in 2017.

Dive Insight:

A shortage of skilled labor continues to plague residential and nonresidential projects nationwide, delaying timelines and raising project costs. Axiometrics noted that the multifamily sector also felt the impact of this trend, delaying many projects in the pipeline for delivery this year.

However, following a strong third quarter, which saw a 20% jump in new units from the previous quarter, the sector can expect robust activity through the first half of 2017 as that inventory is slowly released into the market.

The latest starts figures from the Commerce Department show how this trend is playing out month-to-month in a sector that’s known to be volatile. Multifamily starts jumped nearly 75% in October from the month prior to an annualized rate of 445,000 and were also up 28.2% from a year ago. The sector rebounded from a 38.9% drop in September that put it down 42.5% from the year-earlier period.

Moreover, builder and developer sentiment for apartment and condominium construction rose three points from the second quarter to a score of 53 in the third quarter, according to the recently released National Association of Home Builders’ Multifamily Production Index. The index has stayed above the break-even mark of 50 since early 2012, despite the month-to-month swings in activity due in part to the projects’ typically large scale and long timelines.

Although the near-term outlook remains relatively healthy for the multifamily as it has made the strongest recovery of all construction sectors since the recession, there is a growing belief that it will start to ease back. It comes as overall economic conditions pick up, which is helping to release some the pent-up demand for homebuying back into the market.

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