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Apartment Supply Remains Elevated, No Respite Any Time Soon
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The U.S. apartment supply remains elevated and there seems to be no respite any time soon. While fourth-quarter 2017 was earlier projected to be the peak period for deliveries, delays stemming from labor shortage and escalating costs continue to push the delivery schedule to 2018.
According to the apartment pipeline data from Axiometrics, a RealPage Inc. company, for an estimated 56,186 units, delivery has been postponed to the next year, up from 50,658 units delayed from 2016 to 2017, and 14,805 units from 2015 to 2016. Particularly, the numbers of projects, the completion dates of which are changing to 2018 from 2017, are escalating “week by week, month by month.”
The delayed figure has been based on a formula using prior year’s delay percentage as a base. Particularly, Dallas, New York and Houston are slated to have “most units delayed into 2018.” These are also the metros with the maximum marked supply for 2017, per that report.
Moreover, data, as of Sep 18, suggests expected deliveries of around 370,582 new units for full-year 2017, reflecting a decline of about 11,655 units from the Aug 21 projections. This reveals a shift of deliveries to 2018. Along with new construction starts, identified supply for 2018 climbed 16,729 units and has now reached 298,068 units.
This could cast a pall on residential REIT stocks like AvalonBay Communities, Inc. (AVB - Free Report) , Equity Residential (EQR - Free Report) and Essex Property Trust Inc. (ESS - Free Report) . In fact, performance of residential REITs over the last few quarters has already been affected by elevated level of supply of new units. Now, the anticipation of a continuation of the stressed environment into 2018 is also likely to impact the occupancy levels, as well as landlords’ ability to command more rents and concession levels.
In addition, with some of the residential REITs’ development deliveries running behind schedule amid a delay in construction activities, lease-up net operating income is expected to be adversely affected in the near term.
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Apartment Supply Remains Elevated, No Respite Any Time Soon
The U.S. apartment supply remains elevated and there seems to be no respite any time soon. While fourth-quarter 2017 was earlier projected to be the peak period for deliveries, delays stemming from labor shortage and escalating costs continue to push the delivery schedule to 2018.
According to the apartment pipeline data from Axiometrics, a RealPage Inc. company, for an estimated 56,186 units, delivery has been postponed to the next year, up from 50,658 units delayed from 2016 to 2017, and 14,805 units from 2015 to 2016. Particularly, the numbers of projects, the completion dates of which are changing to 2018 from 2017, are escalating “week by week, month by month.”
The delayed figure has been based on a formula using prior year’s delay percentage as a base. Particularly, Dallas, New York and Houston are slated to have “most units delayed into 2018.” These are also the metros with the maximum marked supply for 2017, per that report.
Moreover, data, as of Sep 18, suggests expected deliveries of around 370,582 new units for full-year 2017, reflecting a decline of about 11,655 units from the Aug 21 projections. This reveals a shift of deliveries to 2018. Along with new construction starts, identified supply for 2018 climbed 16,729 units and has now reached 298,068 units.
This could cast a pall on residential REIT stocks like AvalonBay Communities, Inc. (AVB - Free Report) , Equity Residential (EQR - Free Report) and Essex Property Trust Inc. (ESS - Free Report) . In fact, performance of residential REITs over the last few quarters has already been affected by elevated level of supply of new units. Now, the anticipation of a continuation of the stressed environment into 2018 is also likely to impact the occupancy levels, as well as landlords’ ability to command more rents and concession levels.
In addition, with some of the residential REITs’ development deliveries running behind schedule amid a delay in construction activities, lease-up net operating income is expected to be adversely affected in the near term.
Will You Make a Fortune on the Shift to Electric Cars?
Here's another stock idea to consider. Much like petroleum 150 years ago, lithium power may soon shake the world, creating millionaires and reshaping geo-politics. Soon electric vehicles (EVs) may be cheaper than gas guzzlers. Some are already reaching 265 miles on a single charge.
With battery prices plummeting and charging stations set to multiply, one company stands out as the #1 stock to buy according to Zacks research.
It's not the one you think.
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