The five metros on this list account for almost a third of the units under development nationwide, based on Yardi Matrix data.
Multifamily development activity during the first and second quarters was impacted by lockdown measures, even though many states either classified construction as essential or allowed it to continue with minor restrictions. According to NMHC, the majority of multifamily developers reported that the COVID-19 crisis has slowed down their projects.
According to Yardi Matrix data, 600,900 units were underway throughout the country, as of June. The bulk of construction is concentrated in major multifamily markets, where demand for new supply was high before the pandemic. The total number of apartments underway in the five metros on this list account for 30.6 percent of the nation’s pipeline.
5. HOUSTON
More than 28,000 units were underway in Houston in June. In the metro’s West End-Downtown submarket, GID was working on the 600-unit second phase of The Sovereign at Regent Square. Expected to come online by the end of 2022, the project is part of a three-phase community, with the final phase still in the planning and permitting stages. When completed, the upcoming property will be the submarket’s fifth-largest community and the largest to come online in more than a decade.
Houston has faced a series of challenges over the past couple of years, which have heavily impacted its economy and multifamily market. This year, the coronavirus pandemic pushed oil prices to an 18-year low, severely affecting the energy sector and the metro’s overall employment. Houston lost more than 250,000 jobs in the 12 months ending in May, with unemployment rising from 5.5 percent in March to 14.3 percent in April. And according to June estimates, while the metro managed to slightly bounce back from these losses and improve its unemployment rate to 9.9 percent, its economy will likely continue to contract over the coming quarters.
4. LOS ANGELES
At the end of June, developers were working on almost 30,000 units in metro Los Angeles. In the Hyde Park submarket, Carmel Partners is developing the metro’s largest project, the 1,210-unit Cumulus. Constructed with the help of a $462.7 million loan from Pacific Life Insurance Co., the development is located within an Opportunity Zone and is expected to come online as early as the first quarter of 2022.
Prior to the pandemic, 2020 deliveries forecast in the metro was expected to surpass the number of units completed last year by more than 70 percent. But as California was one of the first states to impose a stay-at-home order and as the number of confirmed coronavirus cases spiked over the past month, uncertainty looms over the number of projects expected to reach completion by year-end. While the leisure and hospitality sector shrunk by 43.9 percent, construction jobs only contracted by 4 percent during the same period. In total, the metro lost more than 600,000 jobs in the 12 months ending in May.
3. MIAMI
Developers were working on projects totaling more than 33,500 units in the metro in June. But as Florida became the pandemic’s new epicenter by mid-July, it is uncertain how many of these projects will deliver on time. As of June, the largest project underway was Melo Group’s Downtown 5th, a 1,042-unit property expected to come online in the first quarter of 2023. Earlier this year, the company opened Miami Plaza, a 425-unit community in the Arts and Entertainment District of downtown Miami. The asset marks the firm’s final development in its plan to bring more than 2,000 transit-oriented apartments to the area.
Miami’s strong job market, driven by its business-friendly climate, has felt the burden of the health crisis. The metro lost 121,100 positions in the 12 months ending in May, equal to a 9.6 percent plunge. As expected, the leisure and hospitality sector was the hardest hit, down by 37.3 percent, or almost 55,000 positions. Meanwhile, with construction deemed essential during the state’s stay-at-home order, leisure and hospitality was the only major sector to remain afloat during the first months of the pandemic, adding 3,400 positions. Overall, the metro’s unemployment rate rose from 4.1 percent in March to 13.4 percent in April, and then dropped to 11.3 percent, according to June estimates.
2. WASHINGTON, D.C.
More than 39,000 units were underway in the metro at the end of June. Lerner Enterprises’ upcoming 1,618-unit Black Hill Germantown is expected to reshape the Germantown-Montgomery Village submarket. Part of the company’s mixed-use master plan, the multifamily project is slated for completion as early as the end of 2020. The overall development is expected to include more than 3 million square feet of office space, a hotel, and some 90,000 square feet of retail. At full build-out, the multifamily segment will be the submarket’s largest community to date.
Before the pandemic, D.C. saw positive employment growth thanks in part to its leisure and hospitality sector, one of the best-performing industries in Washington, D.C. But as the city was forced to issue a shelter-in-place order at the end of March, employment in the metro began to contract, down by 317,900 positions in the 12 months ending in April, with tourism-related jobs accounting for more than half of that. Leisure and hospitality declined by more than 45 percent, diminishing its share of the total employment pool to just shy of 6 percent. However, June estimates showed that construction jobs, which dropped 5.1 percent year-over-year through April, started to increase in May.
1. DALLAS
Developers were busy in Dallas, with more than 53,000 units under construction as of June. Columbus Realty Partners is developing the largest project in the metro—the 1,625-unit expansion of its Parkside at Craig Ranch campus. Five of the six buildings are expected to reach completion this year, with the largest one slated for delivery in 2022. Furthermore, the four phases of the development pushed North Frisco-West McKinney to the top of our breakdown of the most active North Dallas submarkets for development activity.
Texas and Dallas have both taken significant steps toward diversifying their economies in recent years. This, coupled with the metro’s highly skilled workforce and business-friendly environment, made Dallas attractive to a series of smaller and larger companies looking to expand their operations to new markets. As a result, Dallas strengthened its financial activities sector, leading the nation with the highest number of new jobs added to the sector in 2019. Financial activities was the only industry exempt from the total jobs lost in the metro—150,400 positions—in the 12 months ending in April when. The current health crisis, however, has forced a break in Dallas’s outstanding expansion, but not in terms of development activity.
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Author’s note: Yardi Matrix covers all multifamily properties of 50-plus units in size across 133 markets in the United States. This ranking reflects properties that are under construction within that sample group. This article was originally published in Multifamily Housing News on Aug. 21, 2020.