Multifamily Permits & Starts Rebound

Premier office towers, which have so far avoided the fate of the wider office sector, are finally struggling.

Multifamily Permits & Starts Rebound

Premier office towers, which have so far avoided the fate of the wider office sector, are finally struggling.

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Good morning. A national study uncovers renter preferences and priorities in the multifamily market—the good news is that permits and starts are rebounding. Meanwhile, premier office towers nationwide are finally forced to deal with falling rents and slower leasing.

Today’s issue is brought to you by FNRP.

Market Snapshot

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*Data as of 1/28/2024 market close.


Multifamily Permits, Starts See Mixed Performance in 2023

Multifamily Permits and Starts Finish 2023 on Upswing


The good news is that both permitting and construction starts improved by EOY 2023. The bad news is that both metrics were trending down for most of the year.

By the numbers: In December, the seasonally adjusted annual rate (SAAR) for multifamily permits rose 1.4% from November to 449K units. But when compared to 2022, December's numbers were 26.6% lower. Starts, on the other hand, were up 7.5% MoM, reaching 417K units. But similar to permits, starts were down 9.5% YoY.

Digging deeper: On the flip side, completions were up 11.1% MoM, with 509K units completed, and up 33.6% YoY. The number of multifamily units under construction remained unchanged from November at 991K units, but was up 7.4% YoY. Additionally, the number of multifamily units authorized but not started fell 11% in December to 121K units.

City by city: Among the top 10 markets for multifamily permitting, Austin surpassed NYC to take the top spot, with nearly 21.4K units permitted in 2023. Phoenix slipped to third, permitting 18.9K units. Dallas remained in fourth with 17.3K units permitted, followed by Houston in fifth. Atlanta, LA, Raleigh/Durham, DC, and Denver were also in the top 10.

Region by region: When comparing multifamily permitting trends to the previous year, all four Census regions recorded declines. The West and Northeast saw the biggest drops, down 43.9% and 29.9%. The South and Midwest regions had more moderate declines of 19.8% and 15.3%. Despite the overall slowdown in multifamily permitting nationally, some markets still showed YoY gains.


Glimpse of hope: The end of 2023 showed a positive uptick in multifamily permitting and construction starts, offering a beacon of recovery after a year of steep declines. However, the significant YoY drops, especially in key regions, indicate a cautious path forward for multifamily investors, owners, and operators in 2024.


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✍️ Editor’s Picks

  • Real estate rebound: Mortgage rates are expected to fall 5.5% by end of year, boosting optimism in the U.S. real estate market.

  • Byte bonanza: Blackstone (BX) aims to be the top landlord for Big Tech, expanding into AI data centers with unparalleled power capacity.

  • The Year of The Drop: After a great two years, 2023 was a kick in the stomach for CRE, with all 25 of the most active U.S. markets saw double-digit declines in transaction volume.

  • Fears fading: Investors are beginning to show renewed interest in the U.S. CRE market in 2024, despite concerns about interest rates and pricing.

  • Hotel outlook: The hospitality industry ended 2023 with record high average daily rates and revenue per available room, with more projected growth in 2024 and 2025.

  • Sales tax maze: Navigating CRE sales tax implications is headache-inducing at best. But in NYC, it’s a whole different animal.


  • Breaking the home: The U.S. housing market froze as interest rates rose, leading to fewer sales, decreased inventory, and reluctance to move, prompting a potential shift towards renting.

  • Rent relief delay: The LA City Council prevented the eviction of tenants awaiting rental assistance, with over 25K applicants still waiting for funds.

  • Affordable upgrade: Fairstead purchased a Section 8 affordable housing complex in Fort Lauderdale for $26.5M, with plans to renovate it.

  • Squeezing through: Despite a harder multifamily market, Chicago-based CA Ventures sold a 102-unit luxury apartment tower in River North for $61M.

🏭 Industrial

  • Huge capital injection: Amazon Web Services (AMZN) is investing $10B to build two data center campuses in Madison County, MS, the largest single capital investment in Mississippi's history.

  • Expanding elevation: Two tenants filled the remaining space at the Elevation25 warehouse development in Mead, CO, expanding the campus to 1MSF.


  • Brewing change: Local investors attempt to outbid Japan’s Sapporo to return ownership of a historic San Francisco brewery to city residents.

  • Securing Safeway: Brothers International Holding Corp. secured $20.5M to refinance a 143KSF retail center anchored by Safeway (SWY) in San Jose, CA.

  • Acquiring empowerment: Kempner Properties LLC, in partnership with Peter Braus and James Wacht, acquired a grocery-anchored retail center in Summerville for $29M.


  • Doom & gloom: Billionaire Barry Sternlicht predicts a $1T loss in U.S. office real estate values due to the pandemic when all is said and done.

  • Rest in peace: J. Fernando “Fern” Barrueta, a prominent figure in DC brokerages, passed away at 80, leaving a lasting impact on the real estate community and those he mentored.

  • Where Brooklyn at? The Brooklyn office market is struggling, with only 119KSF leased in Q4, down 37% YoY and 19% QoQ.


Economic Downturn Finally Hits Premier US Office Buildings

The Real-Estate Downturn Comes for America’s Premier Office Towers

The Winthrop Center project in Boston. PHOTO: MILLENNIUM PARTNERS

Elite office buildings across the country started seeing the effects of the real estate downturn. Rents at premium properties are falling, while the rate of leasing has slowed down. Tenants, facing higher interest rates and economic pressures, are also more cost-sensitive.

Record lows: Few office developers are considering new ground breakings. Low rents simply do not justify the cost of building expensive office spaces. Last year, the U.S. saw the lowest level of office starts since 2010, with only 31MSF. According to CoStar, new buildings could represent just 1% of total inventory by 2027, the lowest in at least 25 years.

Not so hot right now: Premium office spaces with high-end amenities have performed well since the pandemic. But their sterling appeal is finally declining. Asking rents for prime space in 16 major markets fell in Q3 after peaking in Q2. CBRE reported average asking rents under $69 PSF in Q4. The share of leasing activity in premier towers also fell, with new leases 43% smaller than in 2019.

Cost-effective options: Companies are more cost-conscious than ever when it comes to office space. The gap between asking rents in top buildings and lower-quality buildings is also widening, leading to more lease renewals. In 2022, renewals accounted for 42% of leasing volume, compared to 31% from 2020–2021. The shift towards remote and hybrid work means lower-grade spaces might be a better option.


Changing landscape: Office market dynamics are shifting as companies embrace remote and hybrid work, leading to a decline in demand and leasing activity for premium office towers. With fewer ground breakings and a preference for more cost-effective options, the future demand for even premium office space remains uncertain.


The multifamily housing market in 2023 faced a 40%+ drop in starts, according to RealPage. 

This downturn reflects the impact of higher debt costs, falling property values, steep construction costs, and reduced rents and occupancy. The overall outlook for 2024 is pessimistic, with most developers expecting further reductions in starts. 

Despite a projected spike in completions this year, a significant drop-off is anticipated by late 2025, which will impact both investors and policymakers.

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