Seven years removed from the beginning of the most severe housing market crash since the Great Depression, the U.S. single-family residential sector is finally starting to snap out of its long period of malaise. Home prices, new-home sales, existing-home sales, and housing starts have all trended higher during the past 12-18 months, and while the market remains significantly depressed relative to 2005-06 output, it’s safe to say the single-family housing sector is in a much healthier state.
During the depths of the recession, multifamily construction remained one of the few relatively bright spots of the nation’s residential building sector, driven largely by pent-up demand for apartments and other rental units, such as student and senior housing. But as the economy recovers and homeownership becomes a realistic option for more consumers, the question becomes: Does this spell the end of the multifamily sector’s hot streak?
Not anytime soon, according to FMI’s Construction Outlook Report for First Quarter 2013, which predicts a 31% YOY increase in multifamily construction spending in 2013 and another 27% in 2014 (following 47% growth in 2012). The sector is expected to reach its housing boom peak ($54 billion in annual construction spending) by 2017—although annual percent growth will taper off over the next four years.
Real estate investment services firm Marcus & Millichap is forecasting long-term demand for rental housing to remain strong across most U.S. metro markets. According to its 2013 Apartment Outlook, the recent boom in apartment construction—85,000 units completed in 2012 and an estimated 150,000 units to come online this year, up from just 40,000 in 2011—isn’t enough to meet the pent-up demand for rentals in most markets.
TOP MULTIFAMILY ARCHITECTURE FIRMS
2012 Multifamily Revenue ($)1 IBI Group $42,729,4362 Niles Bolton Associates $22,446,8213 Perkins Eastman $17,400,0004 WDG Architecture $17,233,0005 Solomon Cordwell Buenz $16,000,0006 RTKL Associates $12,992,0007 Perkins+Will $10,783,6198 Skidmore, Owings & Merrill $10,179,0009 HOK $7,730,00010 VOA Associates $6,902,030
TOP MULTIFAMILY ENGINEERING FIRMS
2012 Multifamily Revenue ($)1 STV $42,284,0002 URS Corp. $42,072,0703 AECOM Technology Corp. $39,580,0004 Parsons Brinckerhoff $37,500,0005 Michael Baker Jr. $21,020,0006 Buro Happold Consulting Engineers $20,430,0007 Wiss, Janney, Elstner Associates $18,070,0008 Thornton Tomasetti $13,899,0309 KPFF Consulting Engineers $13,000,00010 Simpson Gumpertz & Heger $10,200,000
TOP MULTIFAMILY CONSTRUCTION FIRMS
2012 Multifamily Revenue ($)1 Lend Lease $1,105,667,0002 Clark Group $733,189,9593 Balfour Beatty $416,669,8564 Swinerton Builders $379,053,2495 Walsh Group, The $277,912,5256 James McHugh Construction $239,964,2587 Whiting-Turner Contracting Co., The $212,734,1208 Weis Builders $207,290,0009 Suffolk Construction $203,442,89410 Harkins Builders $201,000,000
Giants 300 coverage of Multifamily brought to you by Andersen www.andersenwindows.com
“Many metros are well short of new product coming online,” said Hessam Nadji, Managing Director, Research and Advisory Services with Marcus & Millichap, during the firm’s 2013 apartment market forecast. “And the new product that is coming online is ultra-high-end and not really affecting the workforce housing or the middle of the bell curve, where the demand is. Overall, we do not expect building to become an issue whatsoever.”
There are enough impediments to homeownership, experts argue, to keep the rental market strong for the immediate future, including a still-recovering jobs market, increasingly stringent mortgage requirements, and a sizable swath of the home-buyer base that is still reeling from the effects of the housing market downturn, with underwater or delinquent mortgages. Plus, the nation’s two largest generational groups—the baby boomers, who are at or near retirement age, and the Millennials, most of whom are in the very early stages of their career—are ripe for long-term rentals.
This outlook is music to Jeffrey Raday’s ears. Raday is President of McShane Construction, one of the nation’s largest multifamily contractors. The sector will represent more than half of the company’s business in 2013.
“Along with the positive outlook for market-rate and luxury rental developers, we are also encouraged by the growth expectations within the student housing, senior living, affordable housing, and supportive living sectors,” says Raday. “We enjoy a significant amount of both new and renovation construction activity in those markets.”
Despite the exuberance, multifamily experts are fearful of overbuilding, as developers race to catch the market upswing. With nearly a half-million rental units expected to come online between 2013 and 2015, chances are developers and owners in certain markets and submarkets will be caught with their pants down as demand eases.
Luxury tops multifamily trends
Multifamily housing trends vary market to market, but experts point out several overarching shifts that are driving change in the way projects are designed, built, and developed:
Luxury prevails. From urban condos to suburban apartments to rural student housing, developers are meeting the market’s demand for lavish amenities and features, including clubhouses, workout facilities, pools, spas, and upgraded appliances and finishes.
Greater need for space. One-bedroom units currently make up about 80% of the multifamily rental stock in most metros, but Niles Bolton, AIA, CEO and Chairman of Niles Bolton Associates, expects that number to decrease in the coming years as more baby boomers hit the market.
“We are seeing more product with larger units favoring two-bedroom luxury product being developed in affluent, stable neighborhoods,” he says. “I expect to see longer-term rentals in nice properties as empty nesters seek rental homes not located in senior communities.”
Micro units—rentals as small as 250 sf—are gaining acceptance among Millennials, who value location, affordability, and mobility over space.
In addition, developers working in tight, urban spaces have been successful in getting approval for tall, slender structures, allowing them to build where the demand is highest.
“Advances both in structural design and building materials have made constructing skinny multifamily towers much easier than a few years ago,” says Jeff Arfsten, Lend Lease’s Interim Managing Director and COO, Project Management and Construction. “Steel-reinforced concrete is more than twice as strong as it was a generation ago.”
Moving away from the box. Demand is up for complex designs that break up the typical multifamily box, such as sloping walls, high slab heights, and large ceiling-to-floor views, according to Arfsten. “Not many multifamily buildings just go straight up anymore,” he says. “The complexity of designs seems to be indicative of the developer being able to seek higher prices per unit.”
Ditching street-level retail. Bolton says municipalities are starting to ease on the requirements for street-level retail on multifamily projects. “Too many developments over the last 10 years have struggled with city-mandated retail space that has remained vacant because the density and activity were not there to support it,” he says.
Read BD+C's full Giants 300 Report
Related Stories
Museums | Oct 1, 2024
UT Dallas opens Morphosis-designed Crow Museum of Asian Art
In Richardson, Tex., the University of Texas at Dallas has opened a second location for the Crow Museum of Asian Art—the first of multiple buildings that will be part of a 12-acre cultural district. When completed, the arts and performance complex, called the Edith and Peter O’Donnell Jr. Athenaeum, will include two museums, a performance hall and music building, a grand plaza, and a dedicated parking structure on the Richardson campus.
Data Centers | Oct 1, 2024
10 biggest impacts to the data center market in 2024–2025
While AI sends the data center market into the stratosphere, the sector’s accelerated growth remains impacted by speed-to-market demands, supply chain issues, and design innovation necessities.
Higher Education | Sep 30, 2024
Studio Gang turns tobacco warehouse into the new home of the University of Kentucky’s College of Design
Studio Gang has completed the Gray Design Building, the new home of the University of Kentucky’s College of Design. In partnership with K. Norman Berry Associates Architects, Studio Gang has turned a former tobacco warehouse into a contemporary facility for interdisciplinary learning and collaboration.
Warehouses | Sep 27, 2024
California bill would limit where distribution centers can be built
A bill that passed the California legislature would limit where distribution centers can be located and impose other rules aimed at reducing air pollution and traffic. Assembly Bill 98 would tighten building standards for new warehouses and ban heavy diesel truck traffic next to sensitive sites including homes, schools, parks and nursing homes.
Laboratories | Sep 26, 2024
BSL conversions: A cost-efficient method to support high-containment research
Some institutions are creating flexible lab spaces that can operate at a BSL-2 and modulate up to a BSL-3 when the need arises. Here are key aspects to consider when accommodating a rapid modulation between BSL-2 and BSL-3 space.
MFPRO+ News | Sep 24, 2024
Major Massachusetts housing law aims to build or save 65,000 multifamily and single-family homes
Massachusetts Gov. Maura Healey recently signed far-reaching legislation to boost housing production and address the high cost of housing in the Bay State. The Affordable Homes Act aims to build or save 65,000 homes through $5.1 billion in spending and 49 policy initiatives.
Mixed-Use | Sep 19, 2024
A Toronto development will transform a 32-acre shopping center site into a mixed-use urban neighborhood
Toronto developers Mattamy Homes and QuadReal Property Group have launched The Clove, the first phase in the Cloverdale, a $6 billion multi-tower development. The project will transform Cloverdale Mall, a 32-acre shopping center in Toronto, into a mixed-use urban neighborhood.
3D Printing | Sep 17, 2024
Alquist 3D and Walmart complete one of the nation’s largest free-standing, 3D-printed commercial structures
Walmart has completed one of the largest free-standing, 3D-printed commercial structures in the US. Alquist 3D printed the almost 8,000-sf, 20-foot-high addition to a Walmart store in Athens, Tenn. The expansion, which will be used for online pickup and delivery, is the first time Walmart has applied 3D printing technology at this scale.
Retail Centers | Sep 17, 2024
Thinking outside the big box (store)
For over a decade now, the talk of the mall industry has been largely focused on what developers can do to fill the voids left by a steady number of big box store closures. But what do you do when big box tenants stay put?
Government Buildings | Sep 17, 2024
OSHA’s proposed heat standard published in Federal Register
The Occupational Safety and Health Administration (OSHA) has published a proposed standard addressing heat illness in outdoor and indoor settings in the Federal Register. The proposed rule would require employers to evaluate workplaces and implement controls to mitigate exposure to heat through engineering and administrative controls, training, effective communication, and other measures.
