Article originally posted on AZ Big Media on August 24, 2022
The most anticipated RentCafe report is out – and do we have some news. No less than 420,000 new apartments are expected to be built nationwide by the end of this year. and Metro Phoenix has seen a staggering increase of 90% in apartment construction.
And considering 2021 as well, the last time apartment deliveries went over 400,000 units was in 1972.
Here are the highlights for Metro Phoenix apartment construction:
• Phoenix metro makes a sharp increase of 90% in apartment construction compared to last year, and takes the 6th position nationally in terms of new development, with an estimated 16,600 apartments, on the way. The previous year saw just 8,421 new units coming up in the Valley.
• At city level, Phoenix proper will build the bulk of the projected apartments – 5,009 units, of which it already built 2,240. Next in line for Phoenix apartment construction projects are Scottsdale – 1,866, Gilbert – 1,795, and Mesa – 1,769.
• Demand for rental apartments grew nationwide, amid rising inflation and interest rates, which turned the dream of homeownership into a nightmare for some renters. This is what’s driving the current boom in apartment construction, with 420,000 new rentals projected for completion this year.
This construction boom is driven by pent-up demand for apartments nationwide, especially as some renters postpone their dream to become homeowners amid soaring inflation and rising interest rates.
By and large, apartment developers have picked up the pace in both 2021 and 2022, almost unexpectedly exceeding even the most optimistic projections for the post-pandemic multifamily landscape.
“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,” said Doug Ressler, manager of business intelligence at Yardi Matrix.
Surprisingly enough, the New York metro is projected to deliver the most apartments in 2022, exceeding Dallas-Fort Worth from the top position for the first time since 2018. What’s more, developers in half of the top 20 metros have embarked on a veritable apartment building spree and are projected to hit their five-year highs this year.
Interestingly, there’s one big reason why so many metros are set to break their records from the last five years: As Ressler explained, “people who lived with family or friends during the pandemic formed independent households as employment and savings surged.”
Looking at the city-level data, Houston is the absolute leader as far as the number of apartments opened in the first half of the year. Hot on the heels of Space City is another construction-crazed Texas location, Austin, followed at a greater distance by Seattle, WA.
New York metro firing on all cylinders as Dallas-Fort Worth deliveries slow down after a 4-year streak
Despite slight setbacks in previous years (mostly due to pandemic-induced hurdles), New York is back on its feet again — and with a bang: A record 28,153 brand new rental apartments are expected to be finished here before the end of the year, which is almost 50% higher than the number of apartments that were completed throughout the metro in 2021.
That’s a remarkable comeback for a metro that has been bleeding residents as a direct consequence of the pandemic and subsequent restrictions. For example, in 2021, New York’s population decreased by 1.6%. That translates into roughly 328,000 people, according to U.S. Census data.
At the same time, Dallas-Fort Worth metroplex developers hit the brakes on multifamily construction, even as the metro has continued to see some of the largest population increases in the country. The former torchbearer of apartment deliveries is set to add 23,571 new units this year, which is approximately 10% less than its 2021 levels.
Perhaps the most surprising performance in terms of multifamily building this year comes from the Miami metro — the nation’s hottest apartment market. This metro climbed an impressive six positions from 2021 to secure the third spot in our current ranking. That’s a well-deserved comeback for Miami, which used to be one of the busiest apartment builders prior to the pandemic.
Other metros that caught our attention this year were Nashville, TN; Chicago; and Portland, OR — all of which were new entries on our list. Of the three newcomers, the most new apartments are expected to open in Nashville (9,620). Renters in Chicagoland will benefit from 8,573 new apartments by the end of this year, while 8,476 new rentals are expected to open their doors in the Portland metro area.
Meanwhile, compared to 2021 levels, the Boston; San Jose, CA; and Kansas City, MO, metro areas are taking things easy construction-wise — so much so that they’ve been knocked out from our top 20 this year.
Half of the top 20 metros set to reach 5-year peaks in new apartments
In response to outstanding demand for rentals, 10 of the top 20 metros for apartment construction are on track to hit record highs in 2022 compared to their total deliveries in each of the last five years.
The leader of the pack is the New York metro, which has been dealing with a serious lack of available units for several years now. Here, a combination of rising interest rates, lack of available units and growing need for more living space have many would-be homebuyers continuing to rent. As a consequence, New York developers have upped their game and the metro is on track to see the highest number of units delivered in the last five years.
The next record-breaker is Miami, where the existing supply of rentals simply can’t keep up with sky-high demand. Here, too, developers have plunged into a building frenzy that’s set to culminate in record-breaking numbers in 2022 compared to the area’s completions in the last few years.
Similarly, the Austin, TX, metro area is pushing hard to bring an estimated 18,288 new units — the highest number of completions the metro has seen in the past five years — to the market before the end of 2022. What’s more, Austin managed to climb three positions this year to squeeze by Houston (another heavy builder in Texas) and land in fourth place in our ranking.
Other metros that are set to break their five-year records in 2022 are Phoenix; Seattle; Orlando, FL; Nashville, TN; Raleigh, NC; Portland, OR; and Tampa, FL. Each of these is expected to add between 6,000 and 16,000 new apartments by the end of this year.
Phoenix apartment construction ranks No. 8 in nation
On a city-level comparison, completions in the first six months of the year paint a different picture, with Texas cities still being hard-pressed to meet the huge demand for apartments.
Of the four Texas locations that made their way into our top 20, Houston was the undisputed leader when it came to deliveries, with 4,746 units built in the first half of 2022. Companies like Hewlett Packard, NRG Energy, Roboze and Exxon Mobil Corp. continue to expand or relocate here, which continues to attract renters in search of good job opportunities in the city. Consequently, Houston is working to meet the growing demand for housing.
Next up was Austin, where developers added 4,236 new apartments to the market during the first six months of 2022 — and are set to continue this pace of construction throughout the rest of the year. On that note, this growing tech hub’s skyline will look a bit different by the time the new year rings in. One of the largest apartment buildings to reach completion in Austin in 2022 is Sienna at the Thompson, which will bring 331 new units to the city’s housing stock.
The other Texas cities that were in the top 20 nationwide for new apartments were San Antonio — taking sixth place with 2,394 new units added in the first half of 2022 — and Dallas, with 1,507 units built (18th place).
Meanwhile, the number of Seattle apartments increased by 3,232 between January and June this year to reach the third spot on our list. However, supply is struggling to keep up with demand in the Emerald City — which, like other major coastal cities, has been facing an extreme lack of housing for several years now. And, this pace of construction isn’t likely to slow down anytime soon: Seattle’s population is projected to hit 1 million by 2044 and city officials are already working on updating the One Seattle Plan that also tackles new strategies to add more housing.
Next came Miami, the poster child of South Florida’s appeal for renters from all across the country. Developers opened nearly 3,000 new apartments in Miami in the first half of the year, but that still wasn’t enough to ease the skyrocketing demand for rentals in the city.
Further north in Florida, the number of new apartments for rent in Orlando grew by 2,257 between January and June, while renters looking for apartments in Tampa had an extra 2,056 new units to choose from. These cities were the only two other Florida locations in our ranking, taking seventh place and 14th place, respectively.
The rest of the top 20 cities with most new apartments completed in the first half of the year were: Washington, DC; Phoenix; Los Angeles; Queens, NY; Charlotte, NC; Chicago; Manhattan, NY; Alexandria, VA; Portland, OR; Nashville, TN; San Diego, CA; and Atlanta.