Portland's New Apartment Construction Ramping Up
As we look at apartment construction data from 2017, it’s becoming clear, the current market is showing no signs of slowing down any time soon. Through August 2017, permits were issued for approximately 6,500, annualized, this would mean approximately 10,000 units for 2017, thats the busiest year for new construction permits on record. The annualized figures suggest a 2500 unit increase over 2016, and 2018 is looking even stronger.
The increase in permits come from a large backlog and increasing pressure on the city to combat the affordable housing shortage, however, the numbers may come as a surprise to many as there were fears that the introduction of Inclusionary Zoning (IZ) in the City of Portland would slow down, or even stop construction, it seems like the vast majority of permits issued were filed well before the IZ was introduced.
While the introduction of the IZ has slowed down permit applications in the city of Portland, there is still a large backlog of projects to sustain the increasing demand for the foreseeable future. There is still a considerable amount of uncertainty around the IZ program and its full effects on the apartment construction markets are yet to be fully realized, it will be an interesting topic to keep an eye on.
Total Units Proposed & Under Construction
Total Projects Proposed & Under Construction
*Many of the “proposed” projects were originally added in 2014-2016 and may no longer be considered a proposed project. In addition, 2,200 units in Suburban West and 3,100 units in Clark County are part of a master planned project to be developed over 10+ years.
The following chart shows the historical data for issued permits in the city of Portland for apartments. It’s important to take note that the vast majority of these permits issued were all applied for pre IZ, with another 5-10k pre-IZ proposed, but not yet permitted.
When we look at land prices for infill apartment sites across the city of Portland, with commercial/high density residential zoning (i.e. CS, CG, CM, CN, RH, etc; 2,000-10,000 Sq. Ft.). The impact , if any, of IZ on the prices of small sites in the urban area is difficult to identify.
As permits are issued at a record rate, a lot of projects will still fail before they begin for the usual reasons - financing falls through, investors back out, constructions costs have risen dramatically etc. We’ll be keeping a close eye on this space in particular, it will be interesting to see just how many permits are requested following the IZ and it’s longer term effects on the apartment construction market. If supply catches up to demand and housing becomes more affordable while we’re seeing record wage growth in the area, this can only be a good thing for the Portland (and national) economy. More buyers, more sellers, more investors.
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