Dive Brief:
- Apartment developers are slated to deliver 420,000 new apartments across the country this year. The last time the industry hit the 400,000 unit mark was in 1972, according to RentCafe.
- The Dallas-Fort Worth metro area (23,500 apartments slated for delivery) has led the nation in completions for the last four years, but New York City is slated to reclaim the top spot for the first time since 2018 with over 28,000 deliveries.
- Miami should pass stalwarts like Houston and Austin, Texas, to move into the No. 3 spot on the list of metros with most 2022 deliveries. Half of the top 20 metro areas for new starts should hit their five-year peaks in apartment deliveries this year, according to the report.
Dive Insight:
As rents have hit all-time highs and occupancies have tightened around the country, the need for new apartments has never been more apparent. One of the spots where fundamentals have been strongest is Miami, which should see 19,000 new deliveries this year.
Trion Properties, a multifamily investment sponsor and private-equity real estate firm with offices in West Hollywood, California, and Miami, recently bought its first deal in Miami and rents are already ahead of where the company underwrote them.
“We’re running it at 99.5% occupancy, and our renewals for July and August are at 100%,” said Max Sharkansky, managing partner for Trion Properties. “So the only vacancies we have are what we inherited from the seller. We’ve only owned it for a couple of months, but no one has left yet.”
Housing shortages stretch far beyond Miami though. Research commissioned by the National Multifamily Housing Council and National Apartment Association showed that the U.S. needs 4.3 million new apartment units between now and 2035 to mitigate issues related to apartment demand and the shrinking supply.
Of course, to build these sorely needed homes, developers are having to navigate supply backlogs, increasing construction and labor costs and, now, a volatile interest rate environment.
“The construction industry is finally returning to pre-pandemic levels of activity but is still being hampered by three familiar challenges: labor shortages, material costs and availability, and supply chain issues,” Doug Ressler, manager of business intelligence at Yardi Matrix said in the report. Yardi owns RentCafe.
Still, demand from both investors and renters is strong enough to justify new apartments in most areas of the country. “Rents are bailing out everybody on the cost side,” Adam David Lynd, president and CEO of The Lynd Group told Multifamily Dive in an interview earlier this year. “The value creation from those rents is eclipsing the cost overruns.”
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