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
Multifamily Housing | Dec 29, 2022
San Jose is largest U.S. city to abolish minimum parking for new housing
San Jose, Calif., recently became the largest U.S. city to strike down minimum parking requirements for new housing development. The city reversed zoning devised in the 1950s that reputedly gave it the worst sprawl of parking space in northern California.
Codes and Standards | Dec 29, 2022
New York City multifamily owners concerned over fires caused by e-bikes
In 2022, there have been nearly 200 fires and six deaths in New York City caused by lithium-ion batteries used in mobility devices such as electric bikes and scooters.
Multifamily Housing | Dec 27, 2022
Traverse Apartments brings 281 sorely needed rental units to the Denver area
Traverse Apartments offers 281 units, designed by KTGY, is located in Lakewood, Colo.
Multifamily Housing | Dec 21, 2022
Bay Area school district builds 122 affordable apartments for faculty and staff
The 122 affordable apartments at 705 Serramonte, Daly City, Calif., were set aside not for faculty and staff at Jefferson Union High School District.
Multifamily Housing | Dec 20, 2022
Brooks + Scarpa-designed apartment provides affordable housing to young people aging out of support facilities
In Venice, Calif., the recently completed Rose Apartments provides affordable housing to young people who age out of youth facilities and often end up living on the street. Designed by Brooks + Scarpa, the four-story, 35-unit mixed-use apartment building will house transitional aged youths.
Coatings | Dec 20, 2022
The Pier Condominiums — What's old is new again!
When word was out that the condominium association was planning to carry out a refresh of the Pier Condominiums on Fort Norfolk, Hanbury jumped at the chance to remake what had become a tired, faded project.
Cladding and Facade Systems | Dec 20, 2022
Acoustic design considerations at the building envelope
Acentech's Ben Markham identifies the primary concerns with acoustic performance at the building envelope and offers proven solutions for mitigating acoustic issues.
Self-Storage Facilities | Dec 16, 2022
Self-storage development booms in high multifamily construction areas
A 2022 RentCafe analysis finds that self-storage units swelled in conjunction with metros’ growth in apartment complexes.
Sponsored | Resiliency | Dec 14, 2022
Flood protection: What building owners need to know to protect their properties
This course from Walter P Moore examines numerous flood protection approaches and building owner needs before delving into the flood protection process. Determining the flood resilience of a property can provide a good understanding of risk associated costs.
Sponsored | Multifamily Housing | Dec 14, 2022
Urban housing revival: 3 creative multifamily housing renovations
This continuing education course from Bruner/Cott & Associates highlights three compelling projects that involve reimagining unlikely buildings for compelling multifamily housing developments.
