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At a breakfast event presented by Multifamily NW on Wednesday, speaker Greg Frick of HFO Investment Real Estate wondered aloud what multifamily investors and brokers have been wondering since the boom in new construction began: When will it end?

鈥淭he last few years in the Portland apartment industry have been the best of times,鈥� he said. 鈥淏ut as we all know, every party must end. Everyone wants to know when we’ll see a transition to a renters’ market.鈥�

Keynote speaker Jerry Johnson of Johnson Economics hinted that it may be soon.

鈥淲e’re all hoping to feel a second wind,鈥� he said. 鈥淏ut it also might be time to start thinking about the hangover.鈥�

2014 is on pace to be the most active year for new apartment permits issued in Multnomah County since at least 1990, according to data compiled by Patrick Barry, associate appraiser at Barry & Associates.

鈥淭hrough August 2014, permits have been issued for 2,846 new units,鈥� he said. 鈥淚f this pace continues, Multnomah County alone will issue permits for close to 4,300 new units.鈥�

At the peak of residential construction in 2003, Multnomah County issued permits for about 3,300 units, data shows.

In the Portland-metro area overall, 4,511 new construction permits were issued through August 2014, Barry & Associates reported; for comparison, 5,821 new construction permits were issued for all of 2013.

鈥淲e expect the new units during 2014 and 2015 to bring the Portland apartment market to a more balanced state,鈥� Mark Barry said at Wednesday’s breakfast presentation. 鈥淛ust as construction focused on the urban core, vacancy rates will be more affected in the urban core.鈥�

In 2014 and 2015, between 10,000 and 12,000 new apartment units will be constructed in the Portland-metro area, Patrick Barry estimates.

鈥淚n spring 2014 we were tracking 58 projects under construction with 6,500 units,鈥� he said. 鈥淎pproximately 1,800 of these units were completed over the last six months. In that same time, construction began on an additional 3,500 units to bring the total units under construction to 8,200.鈥�

As of fall 2014, apartment vacancy in Portland is 3.8 percent, Barry & Associates reported. But with the expected influx of new construction between now and the end of 2015, Johnson predicts vacancy will exceed 5 percent sometime in 2016.

Low vacancy rates translate to higher rents, because landlords are able to charge more due to increased demand. Johnson said there was a time when charging tenants $1 per square foot was normal. That crept up to $2 per square foot for new construction. Now, Johnson said rents have increased to the point where landlords can sometimes charge up to $3 per square foot for high-end apartments.

The predicted rise in vacancy rates could cause a drop in the amount that landlords can charge tenants.

鈥淧ricing power is decreasing, which means people will have to be smarter about what they’re delivering 鈥� and (it won’t be an owners’ market where) any idiot can make money,鈥� Johnson said. 鈥淏ut in my opinion the high desire for apartments in an urban location makes the risk worth it.鈥�

Johnson said his office knows of 25,000 units currently planned or proposed in the Portland area. Additionally, he said he is aware of about 3,000 to 4,000 more he’s not allowed to talk about. At this rate, the Portland area is on track to see permits requested for about 7,000 units annually in 2014, 2015 and 2016, he said.

At current rates, Johnson predicts 2014 will be the first year where new apartment supply will outpace absorption, though only slightly. If new construction stays on pace with Johnson’s predictions, new supply will top 7,000 units in both 2015 and 2016, whereas the demand for new construction will stay around 4,800 units per year. If so, vacancy will increase to over 6 percent and cause rents to drop.

The major push for new multifamily construction is beginning to shift from the urban core to more suburban areas, Johnson said.

鈥淲e’re starting to see some of the higher-value projects moving into the suburban communities,鈥� Johnson said. 鈥淲e’re seeing more urban-style construction in the suburbs.鈥�

The suburban west side of Portland 鈥� Beaverton and Hillsboro 鈥� has 6,897 units under construction, or 28 percent of the total. The close-in west side of Portland has 5,815 units under construction, or 23 percent. From there, the numbers drop significantly, with the next highest being close-in Northeast Portland, which has 14 percent of current new apartment construction.

Johnson thinks that high-amenity construction in the suburbs, coupled with lower rents those areas bring, could begin to draw similar tenants who want to live downtown but can’t afford it.

鈥淓verybody wants to live downtown,鈥� he said. 鈥淢illennials aren’t remarkably different than baby boomers 鈥� they want the same things; they just can’t afford them.鈥�