flexiblefullpage
billboard
interstitial1
catfish1
Currently Reading

Amid single-family housing’s comeback, rental market not skipping a beat [2013 Giants 300 Report]

Amid single-family housing’s comeback, rental market not skipping a beat [2013 Giants 300 Report]

As the economy recovers and homeownership becomes a realistic option for more consumers, will it spell the end of the multifamily sector’s hot streak? The experts say no.  


By BD+C Staff | July 16, 2013
The 33-story Three Harbour Green tower is the final piece of a three-building de
The 33-story Three Harbour Green tower is the final piece of a three-building development fronting seven acres of waterfront park space in Vancouver. IBI Group provided architectural and interior design services on the project, which incorporates residential units on the west side of the tower and office space on the east portion. The two functions are divided on the exterior by a series of stone-clad sky gardens hanging off the building. PHOTO: BOB MATHESON
This article first appeared in the BD+C July 2013 Issue issue of BD+C.

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 $42,729,436
2 Niles Bolton Associates $22,446,821
3 Perkins Eastman $17,400,000
4 WDG Architecture $17,233,000
5 Solomon Cordwell Buenz $16,000,000
6 RTKL Associates $12,992,000
7 Perkins+Will $10,783,619
8 Skidmore, Owings & Merrill $10,179,000
9 HOK $7,730,000
10 VOA Associates $6,902,030

TOP MULTIFAMILY ENGINEERING FIRMS

2012 Multifamily Revenue ($)
1 STV $42,284,000
2 URS Corp. $42,072,070
3 AECOM Technology Corp. $39,580,000
4 Parsons Brinckerhoff $37,500,000
5 Michael Baker Jr. $21,020,000
6 Buro Happold Consulting Engineers $20,430,000
7 Wiss, Janney, Elstner Associates $18,070,000
8 Thornton Tomasetti $13,899,030
9 KPFF Consulting Engineers $13,000,000
10 Simpson Gumpertz & Heger $10,200,000

TOP MULTIFAMILY CONSTRUCTION FIRMS

2012 Multifamily Revenue ($)
1 Lend Lease $1,105,667,000
2 Clark Group $733,189,959
3 Balfour Beatty $416,669,856
4 Swinerton Builders $379,053,249
5 Walsh Group, The $277,912,525
6 James McHugh Construction $239,964,258
7 Whiting-Turner Contracting Co., The $212,734,120
8 Weis Builders $207,290,000
9 Suffolk Construction $203,442,894
10 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

Sustainability | Aug 14, 2024

World’s first TRUE Zero Waste for Construction-certified public project delivered in Calif.

The Contra Costa County Administration Building in Martinez, Calif., is the world’s first public project to achieve the zero-waste-focused TRUE Gold certification for construction. The TRUE Certification for Construction program, administered by Green Business Certification Inc. (GBCI), recognizes projects that achieve exceptional levels of waste reduction, reuse, and recycling.

Energy Efficiency | Aug 9, 2024

Artificial intelligence could help reduce energy consumption by as much as 40% by 2050

Artificial intelligence could help U.S. buildings to significantly reduce energy consumption and carbon emissions, according to a paper by researchers at the Lawrence Berkeley National Laboratory.

Sponsored | Healthcare Facilities | Aug 8, 2024

U.S. healthcare building sector trends and innovations for 2024-2025

As new medicines, treatment regimens, and clinical protocols radically alter the medical world, facilities and building environments in which they take form are similarly evolving rapidly. Innovations and trends related to products, materials, assemblies, and building systems for the U.S. healthcare building sector have opened new avenues for better care delivery. Discussions with leading healthcare architecture, engineering, and construction (AEC) firms and owners-operators offer insights into some of the most promising directions. This course is worth 1.0 AIA/HSW learning unit.

Data Centers | Aug 8, 2024

Global edge data center market to cross $300 billion by 2026, says JLL

Technological megatrends, including IoT and generative AI, will require computing power to be closer to data generation and consumption, fueling growth of edge IT infrastructure, according to a new JLL report.

K-12 Schools | Aug 8, 2024

New K-12 STEM center hosts robotics learning, competitions in Houston suburb

A new K-12 STEM Center in a Houston suburb is the venue for robotics learning and competitions along with education about other STEM subjects. An unused storage building was transformed into a lively space for students to immerse themselves in STEM subjects. Located in Texas City, the ISD Marathon STEM and Robotics Center is the first of its kind in the district. 

Products and Materials | Aug 8, 2024

EPA issues $160 million in grants for clean manufacturing of steel, other construction materials

The U.S. Environmental Protection Agency will provide 38 grant recipients with nearly $160 million to support efforts to report and reduce climate pollution from the manufacturing of construction materials and products.

University Buildings | Aug 1, 2024

UC Riverside’s student health center provides an environment on par with major medical centers

The University of California, Riverside's new Student Health and Counseling Center (SHCC) provides a holistic approach to wellness for students throughout the UC Riverside campus. Designed by HGA and delivered through a design-build partnership with Turner Construction Company, SHCC provides healthcare offerings in an environment on par with major medical centers.

MFPRO+ News | Aug 1, 2024

Canada tries massive incentive program to spur new multifamily housing construction

Canada has taken the unprecedented step of offering billions in infrastructure funds to communities in return for eliminating single-family housing zoning.

Government Buildings | Aug 1, 2024

One of the country’s first all-electric fire stations will use no outside energy sources

Charlotte, N.C.’s new Fire Station #30 will be one of the country’s first all-electric fire stations, using no outside energy sources other than diesel fuel for one or two of the fire trucks. Multiple energy sources will power the station, including solar roof panels and geothermal wells. The two-story building features three truck bays, two fire poles, dispatch area, contamination room, and gear storage.

Contractors | Aug 1, 2024

Nonresidential construction spending decreased 0.2% in June

National nonresidential construction spending declined 0.2% in June, according to an Associated Builders and Contractors analysis of data published today by the U.S. Census Bureau. On a seasonally adjusted annualized basis, nonresidential spending totaled $1.21 trillion. Nonresidential construction has expanded 5.3% from a year ago.

boombox1
boombox2
native1

More In Category

Urban Planning

Bridging the gap: How early architect involvement can revolutionize a city’s capital improvement plans

Capital Improvement Plans (CIPs) typically span three to five years and outline future city projects and their costs. While they set the stage, the design and construction of these projects often extend beyond the CIP window, leading to a disconnect between the initial budget and evolving project scope. This can result in financial shortfalls, forcing cities to cut back on critical project features.




halfpage1

Most Popular Content

  1. 2021 Giants 400 Report
  2. Top 150 Architecture Firms for 2019
  3. 13 projects that represent the future of affordable housing
  4. Sagrada Familia completion date pushed back due to coronavirus
  5. Top 160 Architecture Firms 2021