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Grab the aspirin, have takeout delivered, and get ready for the 2.6 year CBD multifamily hangover: 2,700 units to deliver this year, absorption averaging 1,100 units/year

• It is no secret to anyone watching the cranes in the sky that the CBD multifamily construction market has been on fire for the past four years. With approximately 7,200 units of new construction delivering, the CBD’s apartment boom is smaller than most around the country but highly significant in a market that has seen limited to no new apartment construction of scale for decades.

• While there is no cause for alarm over the long term, with new construction apartments that delivered between 2013 and 2016 experiencing 95% occupancy, the fundamentals suggest a bit of a slowdown in 2018. 2017 deliveries average 47% occupancy, and buildings with rents of $3.50 per square foot and above are averaging approximately 60% occupancy. With 2,700 units expected to deliver this year and a theoretical 1,300 units left to lease from 2017 deliveries, it is possible that 2,900 units of new construction will remain available at the end of 2018, or a 2.6 year supply of apartments. Renters should expect concessions as landlords compete to stabilize their properties.

• The good news is that residential demand shows no sign of completely evaporating, and the 2019 multifamily pipeline is considerably thin (just 460 units). Developers with interest in constructing new apartments would do well to sit back, sharpen their pencils, and peg deliveries at 2022 and beyond in order to give the market some time to catch up. 

Source: JLL Research, CoStar

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