After dipping in the previous two quarters to levels unseen in nearly a decade, the Multifamily-for-Rent outlook for design and construction firms returned to pre-COVID levels in the 3rd Quarter, according to the PSMJ Resources’ Quarterly Market Forecast (QMF). The market’s net plus/minus index (NPMI) reached 40% for the 3rd Quarter, following quarters of -2% and +7%, respectively, in the first half of 2020. The negative index in the 1st Quarter was the first for the Multifamily market since 2010.
"The entire Housing market is showing impressive growth potential based on A/E proposal activity,” said PSMJ Senior Principal David Burstein, PE, AECPM. “This view is reinforced by government statistics for housing permits and new home starts. Multifamily housing (apartment buildings) took a brief pause from its 10-year growth surge when the COVID-19 crisis first hit in March, but has since recovered quite nicely. The condominium market actually saw a significant dip this spring, but more recently is showing signs of recovery, albeit not to the same levels as Multifamily-for-Rent.”
PSMJ’s NPMI expresses the difference between the percentage of firms reporting an increase in proposal activity and those reporting a decrease. The QMF has proven to be a solid predictor of market health for the architecture and engineering (A/E) industry since its inception in 2003. A consistent group of over 300 A/E firm leaders participate regularly, with 162 contributing to the most recent survey.
Multifamily-for-Rent Market Proposal Activity – 1Q08 to 3Q20 (NPMI)
The Multifamily market returned to positive territory out of the Great Recession in the 4th Quarter of 2010 with an NPMI of 24%, then jumped to 44% in the 4th Quarter of 2011. It never dropped below 41% again until it plummeted from 54% in the 4th Quarter of 2019 to -2% in the 1st Quarter of 2020.
“Many of the factors that drove Multifamily's growth pre-COVID remain in place,” adds Burstein. “Plus, there is now a new factor – the potential flight of many people from cities to suburbs – which is shifting the location of the demand. So we believe the Multifamily market will continue to be strong into the foreseeable future.”
Condominium proposal activity soared to a positive NPMI of 11% in the 3rd Quarter, up from -26% in the 2nd Quarter. The Condo market took longer to recover from the last recession than Multifamily-for-Rent did, not rebounding to positive numbers until late 2012. Its NPMI generally stayed in the 20% and 30% range for the next seven years running, until plummeting from 22% in the 4th Quarter of 2019 to a nine-year low of -28% in the 1st Quarter of 2020.
Condominium Market Proposal Activity – 1Q08 to 3Q20 (NPMI)
The Multifamily rebound was part of overall improving conditions for the Housing market, which paced all 12 of the major markets assessed in the QMF with an overall NPMI of 38%. Among other Housing submarkets, Single-Family Property (individual houses) also recorded a 40% NPMI (up from 9%), with Single-Family Development (Subdivisions) at 27%, up from -12%, and Senior & Assisted Living (Independent Living) at 26%, up from -1%,.
Among the 12 major markets surveyed, Water/Wastewater was a close second to Housing at 37%, followed by Healthcare (30%), Energy/Utilities (28%) and Light Industry (27%). Overall proposal activity across all markets and submarkets returned to growth mode in the 3rd Quarter with an NPMI of 22%, up from -10% in the 2nd Quarter. The three worst-performing major markets in the 3rd Quarter were Education (-36%), Commercial Users (-31%) and Commercial Developers (-21%).
PSMJ Resources, a consulting and publishing company dedicated to the A/E industry, has conducted its Quarterly Market Forecast for more than 17 years. It includes data on 12 major markets and 58 submarkets served by A/E firms. For more information, go to https://www.psmj.com/surveys/quarterly-market-forecast-2.
Related Stories
Market Data | Nov 25, 2019
Office construction lifts U.S. asking rental rate, but slowing absorption in Q3 raises concerns
12-month net absorption decelerates by one-third from 2018 total.
Market Data | Nov 22, 2019
Architecture Billings Index rebounds after two down months
The Architecture Billings Index (ABI) score in October is 52.0.
Market Data | Nov 14, 2019
Construction input prices unchanged in October
Nonresidential construction input prices fell 0.1% for the month and are down 2.0% compared to the same time last year.
Multifamily Housing | Nov 7, 2019
Multifamily construction market remains strong heading into 2020
Fewer than one in 10 AEC firms doing multifamily work reported a decrease in proposal activity in Q3 2019, according to a PSMJ report.
Market Data | Nov 5, 2019
Construction and real estate industry deals in September 2019 total $21.7bn globally
In terms of number of deals, the sector saw a drop of 4.4% over the last 12-month average.
Market Data | Nov 4, 2019
Nonresidential construction spending rebounds slightly in September
Private nonresidential spending fell 0.3% on a monthly basis and is down 5.7% compared to the same time last year.
Market Data | Nov 1, 2019
GDP growth expands despite reduction in nonresident investment
The annual rate for nonresidential fixed investment in structures declined 15.3% in the third quarter.
Market Data | Oct 24, 2019
Architecture Billings Index downturn moderates as challenging conditions continue
The Architecture Billings Index (ABI) score in September is 49.7.
Market Data | Oct 23, 2019
ABC’s Construction Backlog Indicator rebounds in August
The primary issue for most contractors is not a lack of demand, but an ongoing and worsening shortage of skilled workers available to meet contractual requirements.
Multifamily Housing | Oct 16, 2019
A new study wonders how many retiring adults will be able to afford housing
Harvard’s Joint Center for Housing Studies focuses on growing income disparities among people 50 or older.