Having weathered the coronavirus pandemic somewhat better than the single-family home construction sector, new supply of multifamily housing delivered in 2021 is expected to increase by around 17% to 334,000 units, according to Yardi Matrix’s latest U.S. Outlook.
“Some 174,000 units were absorbed nationally through May, which puts 2021 on track to be among the hottest years since the 2008 recession,” states the report.
As of mid-year, some 863,500 multifamily units were under construction, representing 6% of the existing U.S. stock. That’s good and bad news, suggests Yardi Matrix, because such a large number of projects could impede the overall rent recovery in so-called “gateway” markets like Miami, whose forecasted deliveries are projected to equal 3.7% of its existing stock; Boston (3.6% of existing stock), San Francisco (3.3%), Los Angeles (2.6%), Washington D.C. (2.3%), New York (1.8%) and Chicago (1.3%).
“These new projects might have a difficult time leasing up, as there is already much supply in these metros with limited new demand, especially in the Lifestyle segment,” states the report.
The leaders in multifamily completions over the past 12 months include Austin (4.4% of total stock), Charlotte (4.3%), Minneapolis-St. Paul (3.7%) and Raleigh (3.6%). Yardi Matrix points out that among these four metros, Charlotte has been the only one able to sustain strong rent growth and deliveries simultaneously. Still, rents in all four metros have picked up in recent months, driven by a surge in migration and demand for apartments.
Yardi Matrix foresees Dallas leading the country in multifamily completions this year. Image: Yardi Matrix
SMALLER MARKETS, BIGGER DEMAND
Yardi Matrix looked at 136 markets, and found robust growth in tertiary metros like Northwest Arkansas (home to Walmart’s headquarters city of Bentonville) that led the list with 8.8% of its stock expected to be delivered this year from new construction. Next were Wilmington, N.C. (with 7% of its stock expected to be delivered), and the Southwest Florida Coast (6.8%). These metros had limited existing multifamily housing stock to begin with.
Measured by sheer units, Dallas is forecast to have the highest number of completions in 2021 (21,318 units), followed by Phoenix, Houston, Washington DC, Austin, L.A., Atlanta, and Miami. Yardi Matrix believes that while Dallas, Phoenix, and Houston should have little trouble absorbing new deliveries, “Washington DC might struggle,” because demand is lagging in part due to remote work requirements or preferences, and out-migration.
Material price hikes are the “wild card” in prognostications about apartment development, says Yardi Matrix. The extreme volatility of lumber prices over the past several months, coupled with increases in the cost of other building materials, could slow new starts and force developers “to choose between raising rents and reducing profit margins.”
RENTS RISING AT UNSUSTAINABLE RATES
Through the first six months of 2021, national asking rents rose 5.8%. Yardi Matrix estimates that year-over-year asking rent growth, as of June, stood at 6.3%, “well above the [country’s] pre-pandemic performance.” Rent inflation is even more pronounced in tech hubs and tertiary metros, and asking rent growth in the Southwest and Southeast has been at levels “not seen in decades.”
While this escalation for multifamily units probably isn’t sustainable, Yardi Matrix expects conditions for above-average rent growth to persist in many metros “for months.” The report points out that rents are driven by “buoyant” demand. In the 12 months through May, 378,000 multifamily units were absorbed nationwide. The top markets for absorption as a percentage of total inventories were Miami (8,500 units, or 2.7% of stock), Charlotte (4,500, 2.4%) and Orlando (4,900, 2.1%).
Through June of this year, rent growth in Phoenix was nearly three times the national average. And despite its year-to-year rent decline, New York bounced back in the first half of 2021. Image: Yardi Matrix
By units, Chicago topped the list with almost 7,800 multifamily units absorbed, or 2.2 % of the Windy City’s stock. And for all the talk about New Yorkers evacuating in droves during the pandemic, rents actually rose by 6% during the first half of this year, and more companies are now requiring employees to return to office work. Rent recoveries through the first half of 2021 were also in “full swing” in Chicago (up 6.5%), Miami (6.4%), Boston (5%), Los Angeles (4%) and D.C. (3.3%).
Yardi Matrix’s report offers an economic outlook that foresees a flat labor participation market, and questions about rising inflation. Economic volatility “is likely to continue” globally until markets get a handle on controlling their virus outbreaks. “However, that does not mean there won’t be strong economic growth in certain sectors and geographies in the short term,” the report states.
Related Stories
| Feb 11, 2011
Chicago high-rise mixes condos with classrooms for Art Institute students
The Legacy at Millennium Park is a 72-story, mixed-use complex that rises high above Chicago’s Michigan Avenue. The glass tower, designed by Solomon Cordwell Buenz, is mostly residential, but also includes 41,000 sf of classroom space for the School of the Art Institute of Chicago and another 7,400 sf of retail space. The building’s 355 one-, two-, three-, and four-bedroom condominiums range from 875 sf to 9,300 sf, and there are seven levels of parking. Sky patios on the 15th, 42nd, and 60th floors give owners outdoor access and views of Lake Michigan.
| Feb 11, 2011
Sustainable community center to serve Angelinos in need
Harbor Interfaith Services, a nonprofit serving the homeless and working poor in the Harbor Area and South Bay communities of Los Angeles, engaged Withee Malcolm Architects to design a new 15,000-sf family resource center. The architects, who are working pro bono for the initial phase, created a family-centered design that consolidates all programs into a single building. The new three-story space will house a resource center, food pantry, nursery and pre-school, and administrative offices, plus indoor and outdoor play spaces and underground parking. The building’s scale and setbacks will help it blend with its residential neighbors, while its low-flow fixtures, low-VOC and recycled materials, and energy-efficient mechanical equipment and appliances will help it earn LEED certification.
| Feb 11, 2011
Apartment complex caters to University of Minnesota students
Twin Cities firm Elness Swenson Graham Architects designed the new Stadium Village Flats, in the University of Minnesota’s East Bank Campus, with students in mind. The $30 million, six-story residential/retail complex will include 120 furnished apartments with fitness rooms and lounges on each floor. More than 5,000 sf of first-floor retail space and two levels of below-ground parking will complete the complex. Opus AE Group Inc., based in Minneapolis, will provide structural engineering services.
| Jan 27, 2011
Perkins Eastman's report on senior housing signals a changing market
Top international design and architecture firm Perkins Eastman is pleased to announce that the Perkins Eastman Research Collaborative recently completed the “Design for Aging Review 10 Insights and Innovations: The State of Senior Housing” study for the American Institute of Architects (AIA). The results of the comprehensive study reflect the changing demands and emerging concepts that are re-shaping today’s senior living industry.
| Jan 21, 2011
Harlem facility combines social services with retail, office space
Harlem is one of the first neighborhoods in New York City to combine retail with assisted living. The six-story, 50,000-sf building provides assisted living for residents with disabilities and a nonprofit group offering services to minority groups, plus retail and office space.
| Jan 21, 2011
Nothing dinky about these residences for Golden Gophers
The Sydney Hall Student Apartments combines 125 student residences with 15,000 sf of retail space in the University of Minnesota’s historic Dinkytown neighborhood, in Minneapolis.
| Jan 21, 2011
Revamped hotel-turned-condominium building holds on to historic style
The historic 89,000-sf Hotel Stowell in Los Angeles was reincarnated as the El Dorado, a 65-unit loft condominium building with retail and restaurant space. Rockefeller Partners Architects, El Segundo, Calif., aimed to preserve the building’s Gothic-Art Nouveau combination style while updating it for modern living.
| Jan 21, 2011
Upscale apartments offer residents a twist on modern history
The Goodwynn at Town: Brookhaven, a 433,300-sf residential and retail building in DeKalb County, Ga., combines a historic look with modern amenities. Atlanta-based project architect Niles Bolton Associates used contemporary materials in historic patterns and colors on the exterior, while concealing a six-level parking structure on the interior.
| Jan 20, 2011
Worship center design offers warm and welcoming atmosphere
The Worship Place Studio of local firm Ziegler Cooper Architects designed a new 46,000-sf church complex for the Pare de Sufrir parish in Houston.
| Jan 19, 2011
Baltimore mixed-use development combines working, living, and shopping
The Shoppes at McHenry Row, a $117 million mixed-use complex developed by 28 Walker Associates for downtown Baltimore, will include 65,000 sf of office space, 250 apartments, and two parking garages. The 48,000 sf of main street retail space currently is 65% occupied, with space for small shops and a restaurant remaining.
