Top Markets For Multifamily Construction In 2020 - Part 1

July 7, 2020, Anca Gugic, Multi-Housing News - COVID-19’s impact on the multifamily development industry has spotty results across the map.  In this first part, we present positions six to 10, using Yardi Matrix data.

Multifamily fundamentals have taken a hit due to the COVID-19 pandemic, not just in declining asking rents, but also in dwindling construction trends.  While in some parts of the country multifamily development fared better, other areas saw the construction sector take some dents.

Using Yardi Matrix data, we’ve looked at the top 10 markets with the highest number of units that have started construction during January and May 2020, and compared them with the same period of 2019.

Six of the top 10 metros saw the number of multifamily developments and units actually drop significantly.  West Houston fared the worst, its new inventory dropping by more than 3,000 units compared to January–May 2019.

Still, health care crisis notwithstanding, the country’s housing woes haven’t relented.  Four of the markets show increased volume of units that broke ground in the first five months of 2020.

Below we’ve analyzed the lower five entries of our top 10 list.

10.  Urban Atlanta - Overall, in June 2020, the market had more than 15,000 units in 57 projects under construction, 9,600 of which were slated for completion by year’s end. Atlanta’s rapidly rising population—which in 2019 marked a 1.2 percent year-over-year demographic expansion, well above the 0.3 percent national rate— maintained robust demand for housing.

The development boom of recent years continued, sustained by Mayor Keisha Lance Bottoms, who deemed the sector an essential service following the COVID-19 outbreak.

Between January and May 2020, 2,739 units in 10 properties broke ground in Urban Atlanta, while, during the same period last year, only 1,880 units in seven communities started construction.  The Midtown West/Centennial Place submarket had five new projects breaking ground during this period, for a combined 1,516 units.

The largest project to break ground so far in 2020 is located on a 12-acre site in an opportunity zone at 485 John St. NW. Herndon Square, owned by Hunt Cos., is a mixed-use development with 36,500 square feet of retail space and will be built in five phases.

Upon its 2027 completion, the $166 million project will consist of market-rate units, affordable housing, senior housing and several townhomes.

9.  Miami - With a tourism-heavy economy depending heavily on tourism, Miami’s multifamily market has a challenging year ahead as one-third of its labor force is in high-risk sectors impacted by the pandemic.

Still, multifamily development had more than 19,500 units in 66 properties underway in June, of which about half are estimated to come online by the end of the year.

Like anywhere else around the country, the health crisis is expected to cause delays across all property types currently under development.

In the first five months of 2020, 3,019 units in 13 properties broke ground in the metro, 464 fewer than in the same time frame last year.  Development activity slowed considerably following the outbreak, even though construction was deemed an essential service in Florida.  In April and May only three new properties broke ground here.

Development was most intense in the Little Havana submarket, with three new developments breaking ground for a combined 570 units.  The largest multifamily asset that started construction this year is the second phase of Link at Douglas Station, a 36-story, 421-unit tower complemented by 17,000 square feet of retail space located at 3060 Southwest 37th Court in the Coconut Grove area.

The project is being built by Adler Group in partnership with 13th Floor Investments with the help of a $47 million construction loan issued by TD Bank and is slated for completion in 2022.

8.  West Houston - COVID-19 and the global oil crisis have pushed oil prices to an 18-year low and the impact on the energy sector had a ripple effect throughout the metro.  In June, there were more than 19,000 units under construction, and more than half have the completion date set for 2020.

However, even though construction was deemed essential following the outbreak, delays will likely occur as in addition to disruptions in the supply chain, many developers had temporarily closed their doors. 

Between January and May 2020, 3,321 units in 11 properties broke ground in West Houston, which is a 3,023-unit drop relative to the same time last year.  February marked the best month for multifamily developments, with seven projects beginning construction, and combined, these total 2,063 new units to be delivered in the metro.

West End/Downtown has the bulk of the assets that broke ground in 2020, with 1,956 units in six properties underway.  The submarket also holds some of the largest projects under construction, including the 304-unit Alta River Oaks, a Wood Partners asset situated at 3636 West Dallas St., anticipated to come online by the end of 2020.

7.  Tampa - Tampa had nearly 12,000 units in 51 properties under construction as of June. Roughly 4,000 units of these are slated for completion by the end of the year.

In 2020 through May, 3,469 units in 15 properties started construction, just 277 units below last year’s volume during the same period.  January marked the best month of the year in construction starts with 1,406 units in six properties.

During this time, developers showed interest in several submarkets, with Hyde Park/Davis Island, Lakeland Highlands, Gulfport/Lealman and Dade City each with two new developments underway.  In Downtown Tampa/Ybor City, three developments totaling 812 units broke ground in the first five months of the year. 

The largest new project is located in one of Hyde Park/Davis Island’s Opportunity Zones—1011 East Cumberland—a 388-unit, 23-story property with 13,000 square feet of retail space.  Strategic Property Partners’ asset is anticipated to be completed by mid-2022.

6.  Orlando - The health crisis is already leaving marks across the metro’s economy.  Travel restrictions and stay-at-home orders isolated the metro and Walt Disney World and Universal Orlando had to furlough, lay off and reduce paychecks to tens of thousands of employees.

This has spilled over the multifamily market’s rent growth, which marked the steepest decline among major U.S. metros, down 0.4 percent year-over-year through April.

On the development side, the metro had more than 18,000 units underway in June, 3,644 of which broke ground between January and May 2020 in 12 communities.  By the end of the year, some 9,500 are anticipated to come online.

The new developments are spread across the metro, each of the 12 projects underway being located in a different submarket. Notable projects include the 368-unit, 11-story Orange & Robinson, an MAA asset located at 336 North Orange Ave. slated for completion in 2021.