LOS ANGELES-Although it may seem as though apartment development is entering a glut period, a CBRE report says that permits and starts are just now reaching their long-term averages. The comparative run-up in construction lately follows three years of dormancy, and CBRE is forecasting apartment rents to grow by approximately 2.5% per year for the next three years even as the level of development increases.

“The multi-housing sector is only now beginning to fill a supply shortage that has existed following a three-year-long drought in development resulting from the recession,” says Jim Costello, CBRE's head of Americas Investment Research. “We anticipate that most of the new supply that will come on line over the next few years will be absorbed by pent-up demand.” That being said, the 2.5% rate of annual increases is well below the 3.9% annual average growth since the recovery began in 2010.

Titled “Is the Bloom Off the Multi-Housing Rose?” the report allays concerns about the potential for overbuilding. “If we were to see a good deal of build-versus-buy activity”—that is, investors determining that buying doesn't meet their current targeted returns as well as simply developing a new multifamily asset—“one would expect that it would be most prevalent in markets with the lowest cap rates and greatest investor interest,” the report states. “Our analysis, however, suggests the attractiveness for new development is not necessarily tied to the markets and subtypes with the lowest cap rates.”