Global real estate consultant CBRE is reporting this week a 9.3% drop in permitting activity in U.S. for multifamily units last month is a favorable sign for future market balance due to slower construction activity, reported the World Property Journal.
Multifamily permitting activity (for 5+ units) declined 9.3% year-over-year in September to a seasonally-adjusted rate of 351,000 units, according to the U.S. Census Bureau. This was the lowest rate since March 2016’s 343,000 units and was also well below (-15.9%) the 2018 year-to-date average of 417,000 units.
Three of the four Census regions registered year-over-year declines, with the sharpest drops in the Midwest and the Northeast. The South had a moderate increase, while the West had a small decline in permitting activity.
This is certainly good news for most of the multifamily industry, particularly owners and investors hoping for reduced deliveries that would lead to more market balance in the next few years.
The starts data indicates that multifamily construction activity will remain relatively high for some time yet; a multifamily project started in September 2018 would most likely be completed in 2020. The starts story also seems at odds with permits. Yet, given that permits precede starts, one can expect the decline in permits to translate into a decline in starts in the coming months.