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
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.
Student Housing | Jul 31, 2024
The University of Michigan addresses a decades-long student housing shortage with a new housing-dining facility
The University of Michigan has faced a decades-long shortage of on-campus student housing. In a couple of years, the situation should significantly improve with the addition of a new residential community on Central Campus in Ann Arbor, Mich. The University of Michigan has engaged American Campus Communities in a public-private partnership to lead the development of the environmentally sustainable living-learning student community.
MFPRO+ New Projects | Jul 31, 2024
Shipping containers converted into attractive, affordable multifamily housing in L.A.
In the Watts neighborhood in Los Angeles, a new affordable multifamily housing project using shipping containers resulted in 24 micro-units for formerly unhoused residents. The containers were acquired from a nearby port and converted into housing units at a factory.
Adaptive Reuse | Jul 30, 2024
Empty mall to be converted to UCLA Research Park
UCLA recently acquired a former mall that it will convert into the UCLA Research Park that will house the California Institute for Immunology and Immunotherapy at UCLA and the UCLA Center for Quantum Science and Engineering, as well as programs across other disciplines. The 700,000-sf property, formerly the Westside Pavilion shopping mall, is two miles from the university’s main Westwood campus. Google, which previously leased part of the property, helped enable and support UCLA’s acquisition.
Geothermal Technology | Jul 29, 2024
Rochester, Minn., plans extensive geothermal network
The city of Rochester, Minn., home of the famed Mayo Clinic, is going big on geothermal networks. The city is constructing Thermal Energy Networks (TENs) that consist of ambient pipe loops connecting multiple buildings and delivering thermal heating and cooling energy via water-source heat pumps.
High-rise Construction | Jul 29, 2024
Safdie Architects’ Shanghai office tower features glass-enclosed corner garden that ascends the 35-story structure
Safdie Architects has announced the completion of LuOne Mixed-Use Complex—a business, retail, and entertainment development in the Luwan district of Shanghai, China. The mixed-use complex consists of an eight-level retail galleria, which opened in 2018, and a 35-story office tower, which recently reached completion.
Casinos | Jul 26, 2024
New luxury resort casino will be regional draw for Shreveport, Louisiana area
Live! Casino & Hotel Louisiana, the first land-based casino in the Shreveport-Bossier market, recently topped off. The $270+ project will serve as a regional destination for world-class gaming, dining, entertainment, and hotel amenities.
Smart Buildings | Jul 25, 2024
A Swiss startup devises an intelligent photovoltaic façade that tracks and moves with the sun
Zurich Soft Robotics says Solskin can reduce building energy consumption by up to 80% while producing up to 40% more electricity than comparable façade systems.
Codes and Standards | Jul 25, 2024
GSA and DOE select technologies to evaluate for commercial building decarbonization
The General Services Administration and the U.S. Department of Energy have selected 17 innovative building technologies to evaluate in real-world settings throughout GSA’s real estate portfolio.
