Outsize development activity in some major metros could increase vacancy rates and stagnate rent growth
SANTA BARBARA, Calif., June 26, 2018 – A new report by Yardi® Matrix indicates that multifamily deliveries might outpace demand in some key U.S. housing markets.
Yardi Matrix conducted a study to determine which areas might be at risk of oversupply or undersupply over the next five years. The research revealed that deliveries in 2016 and 2017 helped compensate for the construction shortage in the wake of the Great Recession.
“Most of the metros that are at short-term risk of oversupply have strong economies and healthy multifamily demand, so units coming online should be absorbed by growing populations,” the report concludes.
Markets and submarkets with outsize development activity, however, “can expect volatility” that will give rise to higher vacancy rates and stagnant rent growth. Achieving market equilibrium going forward will require developers to “intelligently calibrate the amount and location of new projects” to accommodate finite demand.
Yardi Matrix identified Denver, Seattle, Dallas, Phoenix, Miami and Charlotte, N.C., as key markets at risk of oversupply over the next five years. Demand is projected to exceed supply in Los Angeles, California’s Inland Empire, Houston, New York, San Diego and Sacramento, Calif.
Read “U.S. Multifamily Supply and Demand Forecasts by Metro” to learn more about homeownership, population shifts, social trends and other factors affecting the multifamily market.
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