Although enjoying solid fundamentals, one of the market's biggest challenges is the substantial
amount of new supply.
In last month's column, we argued that the strong multifamily market will continue on despite the flood
of new supply in the coming years.
But a few surprises popped in, as well — in part due to continued impressive lease - up velocity in many markets facing big
waves of new supply.
These numbers, as well as a
lack of new supply and unusually high demand, have led to increased competition for assets.
Since the end of 2005, the market has absorbed just 51 %
of the new supply of independent living units, and 59 % of assisted living units.
That brought a
flood of new supply to the market just as the global economy — and global demand for oil — began to weaken.
Neither the
volume of new supply nor the amount of demand destruction during the current price collapse are as great as 1981 - 1986, they are more similar than to 2008 - 2009.
If that comes to fruition, that would represent the biggest annual
pipeline of new supply since 81 million sq. ft. of office space was completed in 2002.
How much will the apartment revenues be impacted by the large
block of new supply set to complete?
Consider setting up an email group to support one another and to notify
everyone of new supplies or shortages in the pump room.
If we look at the marginal
effect of the new supply, we should, according to conventional practice, count only the net additional emissions.
After a steady
flow of new supply in recent years, the peak years for national apartment construction are likely to be 2017 and 2018.
A
lot of new supply has come on - line in the senior living space over the last three years, especially in assisted living, which is a very compelling investment category.
Still, we believe the multifamily sector will do just fine in the coming years despite both a
wave of new supply and a revived housing market.
Given this
lack of new supply, tenants will likely consider options in class B or C properties, or continue leaving the core for the suburban markets.
That's roughly the same amount of new student housing that was delivered every year since 2015, though certain universities have seen fluctuations and even elevated
levels of new supply.
Overall, sentiment is positive considering the
volume of new supply that is being added to the market.
That outlook reflects that the biggest portion of this cycle's
block of new supply will reach delivery over the coming few months.
Both companies face significant near - term pressure as a
glut of new supply has caused solar panel prices to plummet, but First Solar has the better opportunity to offset that decline.
Aging baby boomers can be expected to absorb a lot
of new supply as they leave large houses for smaller apartments.
Structural constraints on the
delivery of new supply in a given market reduce an owner's competition for tenants, which may lead to higher occupancy, higher rent levels, stronger rent growth and higher capital values over time.
A
gusher of new supply driven by the stunning growth in U.S. shale oil production — accounting for most of the 80 % spike in overall U.S. production since the end of 2008 — was beginning to overwhelm demand.
This downward trend has been exacerbated by foreign central bank bond buying and a
dearth of new supply.
«Still, the market has proved to be resilient, given a flood
of new supply from developers hoping to cash in from the strong growth rate earlier in the recovery.
«There's still lots
of new supply on the way that will deliver in 2018, especially in the first half of the year,» says Willet.
Of the 125 million sq.
ft. of new supply expected to deliver over the next four quarters, 67 percent is located in just 10 markets, including Chicago, Dallas / Ft.
«There is not a lot
of new supply expected to come on line in the next couple of years,» says Todd Thomas, a senior analyst at KeyBanc Capital Markets in New York.
Supply Risk A student housing metric ranking universities on their
share of new supply of beds as a percent of their total enrollment.
Calgary's downtown vacancy rate is projected to rise to 3.6 per cent, while the suburban market will reach 6.3 per cent by year - end 2008, as almost four million square
feet of new supply comes to market.
When new electricity is required in Ontario, be it to meet demand from economic growth, electrification or to replace a nuclear unit offline for refurbishment, it is clear that wind energy is one of the most cost - competitive
sources of new supply as demonstrated by the results of LRP 1, which resulted in wind power procured at a cost as low as 6.5 cents per kilowatt hour.