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
Adaptive Reuse | Jul 27, 2023
Number of U.S. adaptive reuse projects jumps to 122,000 from 77,000
The number of adaptive reuse projects in the pipeline grew to a record 122,000 in 2023 from 77,000 registered last year, according to RentCafe’s annual Adaptive Reuse Report. Of the 122,000 apartments currently undergoing conversion, 45,000 are the result of office repurposing, representing 37% of the total, followed by hotels (23% of future projects).
Multifamily Housing | Jul 25, 2023
San Francisco seeks proposals for adaptive reuse of underutilized downtown office buildings
The City of San Francisco released a Request For Interest to identify office building conversions that city officials could help expedite with zoning changes, regulatory measures, and financial incentives.
Sponsored | Multifamily Housing | Jul 20, 2023
Fire-Rated Systems in Light-Frame Wood Construction
Find guidance on designing and building some of the most cost-effective, code-compliant fire-rated construction systems.
Multifamily Housing | Jul 13, 2023
Walkable neighborhoods encourage stronger sense of community
Adults who live in walkable neighborhoods are more likely to interact with their neighbors and have a stronger sense of community than people who live in car-dependent communities, according to a report by the Herbert Wertheim School of Public Health and Human Longevity Science at University of California San Diego.
Affordable Housing | Jul 12, 2023
Navigating homelessness with modular building solutions
San Francisco-based architect Chuck Bloszies, FAIA, SE, LEED AP, discusses his firm's designs for Navigation Centers, temporary housing for the homeless in northern California.
Sponsored | Fire and Life Safety | Jul 12, 2023
Fire safety considerations for cantilevered buildings [AIA course]
Bold cantilevered designs are prevalent today, as developers and architects strive to maximize space, views, and natural light in buildings. Cantilevered structures, however, present a host of challenges for building teams, according to José R. Rivera, PE, Associate Principal and Director of Plumbing and Fire Protection with Lilker.
Mass Timber | Jul 11, 2023
5 solutions to acoustic issues in mass timber buildings
For all its advantages, mass timber also has a less-heralded quality: its acoustic challenges. Exposed wood ceilings and floors have led to issues with excessive noise. Mass timber experts offer practical solutions to the top five acoustic issues in mass timber buildings.
Multifamily Housing | Jul 11, 2023
Converting downtown office into multifamily residential: Let’s stop and think about this
Is the office-to-residential conversion really what’s best for our downtowns from a cultural, urban, economic perspective? Or is this silver bullet really a poison pill?
Adaptive Reuse | Jul 10, 2023
California updates building code for adaptive reuse of office, retail structures for housing
The California Building Standards Commission recently voted to make it easier to convert commercial properties to residential use. The commission adopted provisions of the International Existing Building Code (IEBC) that allow developers more flexibility for adaptive reuse of retail and office structures.