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2021 Apartment construction tops 330,000 for fifth year running despite challenges

With more than 330,000 new rental units delivered this year, apartment construction remains strong, with eight metros predicted to hit a five year high. The DFW metro is expected to maintain top spot for apartment construction with Phoenix and Houston also showing strong signs of growth.

The figures show a striking difference between the aftermath of the pandemic and the 2008 housing crisis when three times fewer apartments were under construction in the US. And while there's a slight decrease in new units compared to 2020, the pace of growth is steady considering the challenges of the pandemic, funding, skilled labor shortages and the rising cost of lumber.

DFW building spree

With 21,173 new units due to hit the market by year end, DFW shows no signs of slowing down and maintains its status as top metro for apartment construction. Notably strong growth in Dallas is being driven by the recent relocation of real estate services company CBRE Group and financial services giant Charles Schwab.

The big growth hotspots are across the Sun Belt with the Phoenix metro proving the one to watch. Placed 15th nationally in 2019 and 8th nationally in 2020, its rise has been rapid and this year's third-place reflects a 76% increase in construction units. With a projected 15,846 units this year, the metro is experiencing a population increase of 2.1% and a housing boom that is driving the massive increase in construction.

In fourth spot overall, Houston will build 15,760 units by the end of 2021 and while growth may have slowed in Austin, it lands in seventh spot overall thanks to starts in areas such as Kyle where a number of Tesla suppliers will be based. Overall, it paints a rosy picture for Texas apartment construction.

Strong demand in the southwest

According to Doug Ressler, manager of business intelligence at Yardi Matrix who conducted the research, shifts caused by the pandemic and the resurgence of the residential rental market have thrown the focus onto new residential supply. The multifamily rental market is increasing as new renters enter and Millennials extend their commitments.

But what's driving construction growth in the Southwest metros is a critical combination of employment growth and robust inbound migration. And the Southwest market that meets these conditions says Ressler, is Phoenix. He also cites land availability and zoning laws as additional attractions to the Arizona capital.

The past year has seen an influx of people making the Southwest their home and the population has risen 7.3% since 2015. Austin is the fastest-growing major metro in the US with a number of large-scale apartment construction projects planned for the coming years including a 34 storey apartment tower for downtown slated to complete construction by 2025.

Multifamily sector

Multifamily production across the US pushed total August starts up by 3.9%, with 1.62m units slated to be delivered by next year. The sector has increased by 20.6% including apartments and condos. As lumber prices and other challenges facing the construction sector ease, single-family and multifamily starts are up 20.2% with multifamily permits increasing by 15.8%.

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