For the U.S., March 2013 Multifamily Permitting Approaching Long Term Average
The U.S. Census Bureau posted its March national residential permitting numbers on April 16. Privately-owned housing units authorized by building permit in March, measured on a seasonally adjusted annual rate (SAAR), were 902,000. This was a decrease of 3.9% from the revised February rate of 939,000, but was 17.3% above the March 2012 estimate of 769,000.
During March 2013, annual multifamily (MF) permits increased by 24.7% at the national level from the comparable period a year ago. With the March 2013 MF permit number at 283,000 units, annual MF permitting has now been above 200,000 for 17 consecutive months. The anticipation of moderating but still healthy apartment market fundamentals over the next two years and stable long-term demographics and economic outlook is stimulating developers and investors to start new projects. Even with the first waves of permits during this upward cycle being turned into completions this year, completions will still remain slightly below the long-term historical average for the U.S. and most metropolitan statistical areas (MSAs). By 2014, most MSAs will see their inventory growth pass the historical average. However, there are some MSAs like Charleston; Raleigh; Washington, DC; Baltimore; Austin; Nashville; Philadelphia; and Seattle, where new supply will outpace the historical average rate this year. (March 2013 permitting numbers by metropolitan area will be released on April 24, 2013.)
A link to the February MF permitting report by MSA in Excel is listed under the News & Updates section to the right. Also available is a link to an Excel file detailing the MF permitting trends by month over the past 13 months for 4,147 permit issuing places.
Although still positive, apartment market fundamentals slowed somewhat in March 2013. Nationally, annual effective rent growth in March 2013 slowed to 3.2%, down from 3.5% in February 2013 and 4.1% in March 2012. Prior to March 2013 annual effective rent growth had remained at or around 3.6% since June 2012. The occupancy rate increased to 94.4% in March 2013, up 20 basis points (bps) from February 2013 and 40 bps from the same period a year ago. U.S. apartment occupancy is forecasted to peak at 95.2% in 3Q13 before the effects of the supply pipeline are felt and occupancy begins to decline. The annual effective rent growth is forecast to continue to moderate throughout the remainder of 2013.
The top ten MSAs for MF permitting for the trailing 12 months ending February 2013 were: New York, NY (14,638 units); Houston, TX (14,253 units); Austin, TX (12,770 units); Dallas, TX (12,006 units); Los Angeles, CA (9,210 units); Seattle, WA (9,178 units); Denver, CO (8,243 units); Washington, DC (7,912 units); Raleigh, NC (6,208 units); and Charlotte, NC (5,613 units). Urban infill locations account for the bulk of the supply being delivered this year, although construction activity is now starting to pick up in the suburbs of some of these MSAs as the urban core is getting a little too crowded in a few of them. Some of the top MF permitting places on a trailing 12-month basis through January 2013 were: City of Austin (8,941 units); City of Houston (8,378 units); City of Seattle (7,173 units); City of Los Angeles (6,709 units); City of Dallas (5,864 units); City of Denver (4,967); and Mecklenburg Co., Charlotte (4,651 units).
Privately-owned housing starts in March 2013 measured 1,036,000 (SAAR), up 7.0% from the revised February 2013 rate of 968,000 and 46.7% from the March 2012 rate of 587,000. March’s rate was the highest since June 2008. The 619,000 March 2013 SF starts down from 650,000 in February 2013. MF starts increased to 392,000, 26.9% above February 2013 and 82.3% above the level of a year ago. The MF starts in March 2013 were the most since January 2006 when 423,000 units were started.
Source: Axiom Research