That Multifamily Supply Glut May Actually Be 'Fake News'

Though New York's multifamily market has shown reasons for concern this year, one study suggests such worries may be overstated.

Concessions have been on the rise this year across the city, as a large number of new deliveries has caused what some say is a supply glut that is keeping rent flat or worse. A report from Ackman-Ziff Real Estate Group claims that the supply glut is due to a one-year construction spike that is set to peter out.

Ackman-Ziff contrasts the number of construction permits filed in the period from 2011-2015 to the five years before the recession, from 2004-2008. It found if all the projects for which permits were requested were completed fully, it would still amount in 25% fewer units than what was built in the pre-recession period.

A disproportionate number of permits issued in the past six years was concentrated in 2015, which saw nearly triple the number of permits requested than in 2014. Permit requests dropped 71% in 2016, and are on pace to fall even further this year.

"In 2015, the amount of permits that were pulled was shocking," Ackman-Ziff Managing Director Jason Meister said. "This past construction boom was much more truncated [than in 2004-2008]."

Citing competing fundamentals such as New York's steady job and population growth, low unemployment and low vacancy, Meister called the oversupply concerns "fake news."

"If you’re a developer and you’re looking to build new construction, this is the perfect time to buy land," Meister said. "If you come to market two years from now, the supply is going to be significantly lower."

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