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Apartment Construction Pipeline Still Beset by Delays

Atlanta/Fulton Now No. 1 for 2017 Supply

By Dave Sorter | Friday, August 25, 2017

 

 

 

Delays continue to hit the apartment construction pipeline, as the expected completion dates of more and more projects are shifting from late 2017 into early 2018.

The fourth quarter of 2017 is still expected to be the peak quarter for deliveries in this cycle, according to apartment pipeline data from Axiometrics, a RealPage company, as delays caused by rising costs and labor shortages have decreased the deliveries in the third quarter. Surveys as of Aug. 21 show that 103,861 new units have been identified for delivery in the third quarter, while 117,866 are expected to come to market in the fourth quarter.

Compare that to just three months ago, when data as of May 22 showed 112,856 units expected in the third quarter and 109,333 in the fourth quarter. That means about 9,000 third-quarter units have been delayed or canceled, with about 8,500 units have been added to the fourth-quarter schedule. Both quarters’ totals increased from the first of the year, when 73,748 units had been identified in the third quarter and 65,688 in the fourth quarter.


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Some 381,237 new units were expected for all of 2017 as of Aug. 21, which is down by about 13,300 from the May 22 apartment construction number. While the third-quarter drop of 9,000 was significant, it paled in comparison to the roughly 12,000-unit drop in second-quarter deliveries during the past three months (84,416 units ended up delivering in Q2). And that drop was 22,000 from the estimates at the beginning of the year.


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Meanwhile, identified supply for 2018 has skyrocketed, due both to delays from 2017 and new construction starts. Some 281,139 units have already been identified for 2018, and while this is significantly lower than 2017’s volume, it is approaching the 2016 total and has surpassed the apartment construction totals for 2015 and 2014.

Of course, the 2018 delivery geography is different from that of 2017. New units are expected to drop dramatically in Houston and moderately in Dallas, Atlanta, Denver and Austin, according to apartment pipeline data. But construction still looks to be on the upswing in Washington, DC; and Los Angeles, and stable at near 2017 levels in New York and Seattle.

New York still has the most 2017 units identified in the apartment construction pipeline, but Dallas is less than 200 units behind. If New York delays exceed Dallas’ by more than 200, Texas could retain its streak of hosting the top supply market. Although, as of now, New York is far and away the 2018 leader.


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There has, however, been a change in the submarket delivery rankings. Kings County, NY (Brooklyn) began 2017 with 8,108 units identified for delivery, but delays and cancellations have reduced that to 6,616 as of Aug. 21. That allowed the Atlanta/Fulton submarket to usurp Brooklyn at No. 1, even though apartment pipeline data shows that its completions dropped from 7,326 to 6,898 since the year began.   

Atlanta/Fulton, however, is a huge submarket. A breakdown based on RealPage apartment construction data shows that Midtown Atlanta portion has by far the largest percentage of the submarket’s new supply, with Buckhead a distant second.


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The No. 3 submarket for 2017, Seattle’s Downtown/Capitol Hill/Queen Anne, is the current early leader for 2018 supply.

One thing is clear from the current apartment construction pipeline data: Supply is expected to decrease as 2018 progresses – but a slew of fourth-quarter delays could push the peak to the first quarter of next year. We’ll see.

 

 

Dave Sorter

Dave Sorter

Journalist

Dave Sorter is an award-winning journalist who spent 30 years as a newspaper reporter and editor before joining Axiometrics. He oversees all Axio blogs and newsletters and serves as senior editor of all Axio publications.

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