As of this past September, more than 550,000 apartments were in various stages of construction in the 125 markets tracked by Yardi Matrix. “Given the average length of historical start-to-finish construction times, that should have produced about 360,000 units delivered in 2017,” the report states. “But only about 150,000 units were completed by mid-year and 220,000 through three quarters,” or not far ahead of the pace set with the full-year total of 281,000 deliveries in '16.

Yardi analyzed data from construction of more than 1.5 million apartment units over the past decade, and found that based on a rolling four-quarter average, the length of time to complete properties of 50 units or more has increased by about five-and-a-half months since its low point in the third quarter of 2013. The data show that markets with the biggest increases in average construction time have “some combination of tight labor markets, lack of affordable housing for blue-collar construction workers or large increases in supply that has created competition for workers.”

Since Q3 of '13, Yardi found, the increase in completion times has been greatest in California metro areas. With an average increase of 11.2 months over a four-year period, Orange County had the most significant jump, followed by Eastern Los Angeles (10.6 months) and San Jose (9.5 months). Longer construction times also were seen in metro areas with huge development pipelines, including Charlotte (up 9.3 months), Miami (9.0 months), West Houston (8.6 months), Nashville (8.0 months), Phoenix (7.9 months) and Raleigh (7.5 months).

There's an upside to the slowdown in completions, though. “Reduced deliveries could slow down the decline in occupancy rates as supply overshoots demand, and serve to either prevent overall rents from declining, or slow the rate of deceleration,” according to Yardi Matrix. Nationally, year-over-year rent growth slowed to 2.5% through November, although the rate of decline has stopped.

SANTA BARBARA, CA—This was supposed to be the peak year of this cycle for apartment deliveries. However, the multifamily construction pipeline is taking longer than anticipated to clear out, due mainly to a shortage of qualified labor, says Yardi Matrix. The firm's forecast now calls for 2018 to represent the peak for deliveries of newly built apartments.

“Some analysts posit other reasons—for example, construction materials and structures are more complex today and therefore take longer to complete, or that local government approvals are taking longer than past years—but the labor shortage is almost certainly the primary driver,” according to a Yardi Matrix report. “Multiple surveys done by trade groups associated with the construction industry have been beating the drums about the lack of skilled labor for a few years.”

Construction industry employment has yet to fully recover from the downturn. It peaked at 7.7 million in 2007, dropped as low as 5.5 million in the wake of the Great Recession and now stands at 6.9 million. Nearly a decade after the housing bubble burst, “Fewer younger people are entering the industry as a profession, and employer surveys reveal that development firms are increasingly finding it difficult to hire a full complement of construction workers,” the report states.

At the same time, household formation has steadily increased, and Census Bureau data show that about nine million new renter households were created in the decade leading up to '16. “That has led multifamily construction to soar,” according to the Yardi Matrix report.

As of this past September, more than 550,000 apartments were in various stages of construction in the 125 markets tracked by Yardi Matrix. “Given the average length of historical start-to-finish construction times, that should have produced about 360,000 units delivered in 2017,” the report states. “But only about 150,000 units were completed by mid-year and 220,000 through three quarters,” or not far ahead of the pace set with the full-year total of 281,000 deliveries in '16.

Yardi analyzed data from construction of more than 1.5 million apartment units over the past decade, and found that based on a rolling four-quarter average, the length of time to complete properties of 50 units or more has increased by about five-and-a-half months since its low point in the third quarter of 2013. The data show that markets with the biggest increases in average construction time have “some combination of tight labor markets, lack of affordable housing for blue-collar construction workers or large increases in supply that has created competition for workers.”

Since Q3 of '13, Yardi found, the increase in completion times has been greatest in California metro areas. With an average increase of 11.2 months over a four-year period, Orange County had the most significant jump, followed by Eastern Los Angeles (10.6 months) and San Jose (9.5 months). Longer construction times also were seen in metro areas with huge development pipelines, including Charlotte (up 9.3 months), Miami (9.0 months), West Houston (8.6 months), Nashville (8.0 months), Phoenix (7.9 months) and Raleigh (7.5 months).

There's an upside to the slowdown in completions, though. “Reduced deliveries could slow down the decline in occupancy rates as supply overshoots demand, and serve to either prevent overall rents from declining, or slow the rate of deceleration,” according to Yardi Matrix. Nationally, year-over-year rent growth slowed to 2.5% through November, although the rate of decline has stopped.