RICHARDSON, TX—Even as the construction pipeline has emptied out to a degree, new apartment supply reached a 30-year high in 2017. RealPage data show 395,777 completed units in the 150 largest US metro areas, a 46% increase over 2016 completions. However, on the whole demand continues to keep pace with the new supply.

Notwithstanding a fourth-quarter lull that's characteristic of the season—albeit one that was accompanied by a rent decline at the deep end of the normal range—apartment demand remained strong for '17 and kept occupancy levels steady at 95%. However, RealPage notes that operators have reined in their pricing strategies in an effort to fill all of those new units.

For the nation overall, rent growth in '17 averaged 2.6% year over year, although some markets fared considerably better than that. The 2.6% average is down from the range of 4% to 5% annual increases that were common from 2014 through '16.

Driving the national completion volume last year were the 15 geographically diverse metro areas that have led for development volumes throughout the current cycle. Those markets, which have seen an emphasis on CBD apartment construction, accounted for approximately half of the nation's new units in the past year. New supply grew the nation's apartment inventory by about 2.4% in '17.

A year ago, Houston was the hot spot for apartment completions. Now another Texas city leads the way, as Dallas takes the top spot with 27,974 completed units. New York City comes in second with 23,207 completions, while Houston slips to third place with 21,404 new units.

New supply in Houston was absorbed relatively well despite being elevated by historical standards, RealPage says. Absorption in the nation's energy capital was bolstered in the Q4 by displaced residents who turned to apartments in the wake of Hurricane Harvey.

Annual completions totaled between about 12,000 and 16,000 units in each of the typically high-supply markets of Washington, DC, Atlanta, Los Angeles and Seattle. RealPage reported last July that the CBD rent growth in these four markets varied widely, with Seattle seeing Y-O-Y increases of 7.2% and the Los Angeles urban core experiencing a decline of 0.4%.

The rent-decline situation that L.A. faced was magnified in Nashville. In the Music City, a total of 11,203 new apartments came on line last year, an increase of about 8% in the metro area's inventory, resulting in a steep annual occupancy decline. Rounding out the year's roster of high-volume delivery markets were Austin, Chicago, Denver and Northern New Jersey, with additions totaling just under the 11,000-unit mark.

After hitting a cyclical peak in '17, the apartment market is expected to see supply volumes ease in the current year, says RealPage. Deliveries for the coming year are scheduled at around 300,000 units. That's down from the '17 peak but still roughly 60% above the historical norm.

Construction volumes have also dropped significantly, to 344,000 units as of this past Dec. 31. That's down substantially from the cycle's peak of 487,000 units a year ago, a decline that RealPage says is an indication that the annual completion volumes have peaked for the cycle.

Instant Insights /

Apt. Completions Hit 30-Year High

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