Will urban housing construction resume in 2025?

[jpdivola]

Market rate urban housing construction has dropped off significantly in the past year or two as interest rates, labor and material shortages, and uncertain demand for all hurt development.

Obviously this will very a lot by market. But, with interest rates heading down, crime falling and urban life resuming, will we see return to 2010s levels urban development in our urban cities in the next year or so?

[pdxtex]

Just driving around Portland and the suburbs I'm still seeing tons of new construction. Business journals say only 28 buildings were under construction as of last winter. You mention market rate tho. Im definitely seeing lots of subsidized projects going up. I think density is becoming a huge talking point around the country as we are coming out of the pandemic but were still feeling a bit of a hangover. If rates drop it will probably go back to business as usual with new construction. I don't have alot of hope for office conversations in most instances tho. I think the demand is soft and CBDs around the country are still having some serious social problems. Oregon suburbs are booming tho post covid.

[Nite]

In Canada both interest rates and prices are fallen so i expect 2025 to be the strongest post-covid year for sales.

[chimpskibot]

Maybe in other cities construction has fallen off a cliff, but it is very much in full swing here in Philly. Albeit not as strong as 2020-2022, but plenty of large projects are breaking ground and empty/underused lots are still getting developed in super hot neighborhoods like Rittenhouse, Northern Liberties, Fishtown, East Kensington, Hawthorne and University City.

[Steely Dan]

It seems like every week we get another job or two for small-scale urban infill development down in Chicago's southern lakefront nabes, so at least my firm is trucking right along.

But a lot of our clients are able to self-finance when they can't get favorable construction loan terms, which typically only works for the smaller scale missing middle stuff that's our bread and butter; bigger stuff has certainly been having a rougher go of it in the current interest rate environment.

[Innsertnamehere]

In Canada we are in recession territory and would have been there a while ago if the Feds hadn't pumped immigration up to 22/10. Immigration is dying off though and rate cuts are coming fast and furious so I think we'll see a return soon, if the economy doesn't manage to entirely implode before then. The real estate market is a bit of a bloodbath though, especially the condo market. I'm not sure when we'll see prices and rates recover to a rate which can support new construction again. Right now basically the only starts happening are rentals going through federal subsidy programs.

[iheartthed]

Haven't really noticed a slow down here in NYC either (at least on the ground, haven't looked at any actual data), but most of these projects breaking ground in the past year were probably financed a couple years ago.

[Crawford]

The U.S. Census compiles NB permits from major metros. I don't see any obvious slowdown in urban housing. If anything, housing production appears to be rising, after a few slower years.

[mhays]

There's certainly been a big slowdown in multifamily construction (speaking for the construction and commercial real estate industries). This isn't a question.

Seattle is an example of that. We still start projects but far fewer than in recent years. Subcontractor and material pricing is a big factor. Interest rates are another. There are far more projects planned and slow-playing than there are under construction.

Interest rates and sub prices have stared to come down. Core districts are also seeing more workers return to the office (Amazon going 100% soon!), which should boost those areas further.

[Klippenstein]

Originally Posted by Crawford

The U.S. Census compiles NB permits from major metros. I don't see any obvious slowdown in urban housing. If anything, housing production appears to be rising, after a few slower years.

Why not link to the data and/or include it in your post?

[Crawford]

Originally Posted by Klippenstein

Why not link to the data and/or include it in your post?

https://www.census.gov/construction/bps/msamonthly.html

[mhays]

Funny thing about that data. It DOES appear to show a big slowdown.

July 2022 YTD permits in 5+ unit buildings in MSAs totaled 353,659.

July 2024 YTD permits in 5+ unit buildings in MSAs and Micropolitan areas (new standard) totaled 246,243. I'll guess 220,000 in MSAs.

Also, permits don't equal starts. Lots of projects get permitted and don't happen.

[Klippenstein]

Originally Posted by mhays

Funny thing about that data. It DOES appear to show a big slowdown.

July 2022 YTD permits in 5+ unit buildings in MSAs totaled 353,659.

July 2024 YTD permits in 5+ unit buildings in MSAs and Micropolitan areas (new standard) totaled 246,243. I'll guess 220,000 in MSAs.

Also, permits don't equal starts. Lots of projects get permitted and don't happen.

Interesting. Is that why there are 920 rows of places in the 2024 data and only 384 rows in the 2022 data?

If you look at the total value it's higher by $4 billion in July 2024 than July 2022, but if they're including more than 500 additional locations I'd sure hope it's higher. Kinda hard to compare when they change the standard.

Just looking at Chicago metro area, the total value (YTD in July) is higher in 2024 vs 2022 by about $330 million. It's about a 13% increase. How much of that is due to inflation? It's unclear, but doesn't seem like the impact you might expect. Though like you mentioned these are only permits and not starts. There's been speculation this whole year about interest rates coming down.

[Crawford]

Originally Posted by mhays

Funny thing about that data. It DOES appear to show a big slowdown.

The thread is about urban housing construction. To me, that means multifamily permitting relative to SFH permitting, and/or multifamily permitting in older, centralized metros. It doesn't mean just tracking national housing construction.

I see no slowdown. Rather, I see the share and count of multifamily rising.

[mhays]

I interpret the topic as "fewer multifamily units are getting built in cities." The permit data (as well as everything we see in the development world) agrees with that.

[edale]

Originally Posted by mhays

I interpret the topic as "fewer multifamily units are getting built in cities." The permit data (as well as everything we see in the development world) agrees with that.

Yeah, I've lost count of how many times I've seen articles about developers waiting to start projects until interest rates drop/financial conditions improve. It's pretty commonly known we're in a cool development period right now, especially for high rises. You can probably count on 2 hands all the high rises under construction in the entire state of CA right now. None in SF, 2 maybe 3 in LA, maybe a couple in SD...it's very slow.

[craigs]

Originally Posted by edale

Yeah, I've lost count of how many times I've seen articles about developers waiting to start projects until interest rates drop/financial conditions improve. It's pretty commonly known we're in a cool development period right now, especially for high rises. You can probably count on 2 hands all the high rises under construction in the entire state of CA right now. None in SF, 2 maybe 3 in LA, maybe a couple in SD...it's very slow.

LA has Olympic + Hill (594', 54 fl.), Century City Center (563', 37 fl.), Alloy (390', 35 fl.), and the Weingart supportive housing (17 fl.) u/c right now. But your larger point stands.

[Crawford]

Originally Posted by mhays

I interpret the topic as "fewer multifamily units are getting built in cities." The permit data (as well as everything we see in the development world) agrees with that.

NYC's multifamily permit data is much more robust now than in previous years. The trend is definitely strongly upward. And the ratio of multifamily to SFH has never been higher. So I'm not seeing what's claimed in this thread.

And at the same time, a bunch of Sunbelt sprawlers have declining SFH counts. So there is near-record (for modern times) multifamily in the most urban geographies and a big slowdown in the most sprawly geographies. And it isn't just NYC. In Miami, LA, Boston and Bay Area, SFH has fallen off a cliff relative to multifamily. To me, that contradicts the thread premise.

[jpdivola]

Originally Posted by mhays

I interpret the topic as "fewer multifamily units are getting built in cities." The permit data (as well as everything we see in the development world) agrees with that.

Yeah, I should clarify this thread is mostly about urban core multi-family development. I'm sure if varies a lot by market. In the market I'm most familiar with, DC, new construction starts on market rate housing in the city has basically dried up in the past year. Things that kicked off in the post-pandemic low rates boom of '21-'22 are wrapping up, but new projects are having issues getting financing. Affordable housing is an exception.

My sense is this pattern is somewhat similar across other markets. Boston and Chicago which I'm somewhat familiar with both seem to have experienced a slow down as well as rates/costs have delays many projects.

Apartment construction in Greater Boston hits 10-year low
https://www.bizjournals.com/boston/n...-year-low.html

[Altoic]

Market-rate multifamily sales are doing well in Florida. Besides concern for older condos because inspections are due at the end of this year, new construction is doing well.
In a market where residential highrise development is considerably slow, Tampa now has multiple: One Tampa (495 FT), Pendry (444 FT), Aer Tampa (346 FT), Ritz Carlton (349 FT), Harrison (237 FT), Aqua (170+ ft). This doesn't even count St. Pete!