By the end of 2015, 49 of 54 U.S. markets tracked by CoStar Group, the commercial real estate research firm, are expected to see their apartment vacancy rates increase.
That would suggest that supply in the multifamily sector is catching up with—or in several markets surpassing—demand. Last year, the 340,000 multifamily units started represented the highest level of construction since the 1980s. And some 20,000 new apartments are expected to come online in both Dallas and Denver alone this year.
Yet, despite the threat of oversupply there appears to be a consensus emerging, that positive demographic and economic forces could keep multifamily demand robust—and construction humming—at least through 2016.
The ever-optimistic National Association of Home Builders, for example, forecasts 358,000 multifamily starts in 2015, a level that Robert Denk, NAHB’s senior economist, thinks is “healthy and sustainable.” He told Multifamily Housing News recently that he expects that construction level to be maintained “for the next couple of years.” Denk also expects the country’s economic growth rates to be “high” in 2016.
In its Fourth-Quarter and Year-End 2014 Report, CoStar acknowledges that developers may need to “dial back” new construction after 2015 to keep vacancies (which ended last year at their lowest point in 10 years) and rents at healthy levels. CoStar estimates that new supply could push vacancy rates to 5.5% by the end of 2015.
On the other hand, today’s renter cohort, comprised largely of Millennials, “will take longer to transition into home buying than any demographic group in the last 30 years—obviously a good trend for apartment owners,” says CoStar. The research firm also foresees a 2-million-person increase in Millennial employment over the next few years, resulting in 1.53 million new households. “Apartment investors will find plenty of demand for new product.”
While some renters eventually will start families and relocate to homes in the suburbs, “a larger share of older households will be in the rental market,” mostly for lifestyle reasons. CoStar expects landlords to make a concerted effort to address the needs of renters as they age.
Multifamily as an asset class now exceeds $3 trillion, according to Andrew Florance, Founder and CEO of CoStar Group, which has detailed information on over 450,000 apartment properties in its database, the industry’s largest. More than 100 million Americans now rent, and 30 million people move annually. On Feb. 17, CoStar re-launched Apartments.com, its website for online searches of apartments, condos, and rental homes. Florance projects that, based on anticipated demand, within the next 10 years CoStar Group could achieve $550 million in annual revenue and $250 million in annual cash flow from this site.
CoStar will invest $75 million into marketing Apartments.com in 2015, a multimedia campaign that is scheduled to kick off on March 1.
Related Stories
MFPRO+ New Projects | Oct 30, 2024
BIG’s One High Line finally reaches completion in New York City’s West Chelsea neighborhood
One High Line, a luxury residential project spanning a full city block in New York’s West Chelsea neighborhood, reached completion this summer following years of delays related to investor lawsuits.
MFPRO+ New Projects | Oct 30, 2024
Luxury waterfront tower in Brooklyn features East River and Manhattan skyline views
Leasing recently began for The Dupont, a 41-story luxury rental property along the Brooklyn, N.Y., waterfront. Located within the 22-acre Greenpoint Landing, where it overlooks the newly constructed Newtown Barge Park, the high-rise features East River and Manhattan skyline views along with 20,000 sf of indoor and outdoor communal space.
Multifamily Housing | Oct 28, 2024
A case for mid-rise: How multifamily housing can reshape our cities
Often referred to as “five-over-ones,” the mid-rise apartment type is typically comprised of five stories of apartments on top of a concrete “podium” of ground-floor retail. The main criticism of the “five-over-one” is that they are often too predictable.
Adaptive Reuse | Oct 22, 2024
Adaptive reuse project transforms 1840s-era mill building into rental housing
A recently opened multifamily property in Lawrence, Mass., is an adaptive reuse of an 1840s-era mill building. Stone Mill Lofts is one of the first all-electric mixed-income multifamily properties in Massachusetts. The all-electric building meets ambitious modern energy codes and stringent National Park Service historic preservation guidelines.
MFPRO+ News | Oct 22, 2024
Project financing tempers robust demand for multifamily housing
AEC Giants with multifamily practices report that the sector has been struggling over the past year, despite the high demand for housing, especially affordable products.
Products and Materials | Oct 17, 2024
5 multifamily tech products for your next project
Multifamily housing and technological upgrades go hand-in-hand. From the rise in electric vehicle charging needs to the sophistication of smart home accessories, tech products are abound in the multifamily space.
Codes and Standards | Oct 16, 2024
North Carolina’s code policies likely worsened damage caused by Hurricane Helene
The North Carolina Legislature’s rejection of building code updates likely worsened the damage caused by Hurricane Helene, code experts say. Over the past 15 years, lawmakers rejected limits on construction on steep slopes, which might have reduced the number of homes destroyed by landslides.
MFPRO+ News | Oct 16, 2024
One-third of young adults say hurricanes like Helene and Milton will impact where they choose to live
Nearly one-third of U.S. residents between 18 and 34 years old say they are reconsidering where they want to move after seeing the damage wrought by Hurricane Helene, according to a Redfin report. About 15% of those over age 35 echoed their younger cohort’s sentiment.
Student Housing | Oct 9, 2024
University of Maryland begins work on $148 million graduate student housing development
The University of Maryland, in partnership with Campus Apartments and Mosaic Development Partners, has broken ground on a $148.75 million graduate student housing project on the university’s flagship College Park campus. The project will add 741 beds in 465 fully furnished apartments.
MFPRO+ News | Oct 9, 2024
San Francisco unveils guidelines to streamline office-to-residential conversions
The San Francisco Department of Building Inspection announced a series of new building code guidelines clarifying adaptive reuse code provisions and exceptions for converting office-to-residential buildings. Developed in response to the Commercial to Residential Adaptive Reuse program established in July 2023, the guidelines aim to increase the viability of converting underutilized office buildings into housing by reducing regulatory barriers in specific zoning districts downtown.
