Developers of multifamily apartment buildings remain mostly positive about their markets’ current conditions, according to the latest quarterly tracking data that the National Association of Home Builders released on February 26.
NAHB’s Multifamily Production Index (MPI), based on responses from 93 developers across the country, stood at 54, on a scale of 0 to 100, in the fourth quarter of 2014. The Index—a composite measure of developer sentiments about construction for low-rent units, market-rate rentals, and for-sale condos—registered above 50 for each quarter last year, and has been hovering at 50 or higher since the first quarter of 2013.
The latest reading “is in line with our view that the multifamily segment of the industry has largely recovered from the downturn,” said NAHB Chief Economist David Crowe. “After increasing steadily over the past several years, multifamily production has now reached a healthy, sustainable level.”
Developers’ attitudes are also reflected in their willingness to take on future projects. In January, permits issued for buildings with five or more units rose by 13.8% to an annualized rate of 372,000, according to the Census Bureau.
A closer look at the numbers finds that developers’ sentiments about current conditions for market-rate starts, at an index of 62, were more robust than their sentiments for either low-rent starts (52) or for-sale condo starts (50).
NAHB’s Vacancy Index, which measures the industry’s perception about apartment vacancies, stood at 39 in the fourth quarter of 2014, compared to 38 for the same quarter a year earlier. (The lower the index, the fewer the perceived vacancies.) Interestingly, developers perceived lower vacancies for Class B apartments compared to either Class A or C apartments.
Developers’ attitudes are also reflected in their willingness to take on future projects. In January, permits issued for buildings with five or more units rose by 13.8% to an annualized rate of 372,000, according to preliminary estimates released by the Census Bureau on February 18.
Multifamily starts in January were up 24.5% over the same month a year earlier to an annualized rate of 381,000 units. In 2015, NAHB expects multifamily starts ultimately to increase modestly to around 358,000. “Because of strong job growth, we expect to be able to keep building for the foreseeable future,” said W. Dean Henry, CEO of Legacy Partners Residential in Foster City, Calif., and chairman of NAHB’s Multifamily Leadership Board.
Financing projects should not be an issue, as more lenders are jumping into this sector. Banks and Commercial Mortgage-Backed Securities lenders increased their market share of lending for multifamily projects through 2014, and are expected to be even bigger players this year, as Fannie Mae and Freddie Mac pull back. “Capital is plentiful and many lenders are expanding their target markets for investments,” observed Faron Thompson, head of Jones Lang LaSalle’s multifamily debt finance team.
It’s worth noting, though, that Fannie and Freddie expect demand for multifamily housing to soften a bit over the next two years, and for most of the growth to occur in a limited number of metro markets.
Related Stories
| Aug 9, 2019
Whirlpool Debuts Smart All-In-One Washer and Dryer
Whirlpool washer and dryer in one machine can provide laundering solutions in apartments with limited space.
| Aug 9, 2019
'Buildings Don't Lie': A building science reference book worth your time and money
Review of "Buildings Don't Lie," by engineer Henry Gifford.
| Aug 8, 2019
Wilsonart Engineered Surfaces to acquire Czech firm Technistone
U.S. manufacturer Wilsonart, maker of High Pressure Laminate, Quartz, Solid Surface, Coordinated TFL and Edgebanding products, moves to acquire Technistone.
Multifamily Housing | Aug 7, 2019
New start, new life, new friends: Student residence life in the age of Instagram
When it comes to the design and space planning of your residence life program, the quality of the space you create will be reflected in the social media feeds of your students.
Multifamily Housing | Aug 6, 2019
Using P3s to create affordable housing, public services
How the city of Chicago and nonprofit groups partnered to build three libraries plus affordable housing in underserved neighborhoods.
Multifamily Housing | Aug 3, 2019
A plant—or at least its image—grows in Brooklyn
A 90-foot mural overlooks the courtyard of a new residential building.
| Aug 2, 2019
Closet System Adds Value to Grand Rapids Apartment Community
20 Fulton Street East is a 12-story residential community in downtown Grand Rapids, Mich., developed by Brookstone Realty Management, where Organized Living's closet system was installed by dealer Rayhaven Group.
Multifamily Housing | Jul 31, 2019
Amenities war no more? Research report explores multifamily market
Multifamily developers show no signs of pulling back on specialty spaces and unique offerings in an effort to attract high-quality tenants, according to new research from Multifamily Design+Construction.
Multifamily Housing | Jul 31, 2019
100% affordable housing development features 62-units for low-income households
Magnusson Architecture + Planning is designing the project.
Multifamily Housing | Jul 24, 2019
Multifamily transformation: Historic mansion converted to short-term housing for homeless families
The 1885 Victorian home in Cambridge, Mass., gets a new, energy-efficient life as Renae's Place, short-term housing for homeless women and their children.
