Demand Continues For Multifamily Inventory
Investors who want to add more multifamily assets to their portfolios can take advantage of current conditions to produce long-term success. The National Multifamily Housing Council’s (NMHC) July 2015 quarterly survey provides insights on why the multifamily market is still strong. Drake Realty Group’s team specializes in locating and procuring urban infill core multifamily and mixed-use development sites and uses sources like the NMHC data as part of our research for clients.
The most recent NMHC survey shows an increase in market tightness from 58 in the April 2015 survey to 61 in July 2015.
Market tightness refers to demand for multifamily units compared to inventory in markets across the country. Existing properties are nearly filled to capacity and when new developments open, investors are seeing solid demand for units thereby creating low vacancies and high rent increases.
In addition, markets with above average annual job growth tend to have above average rent growth. Job growth is the ‘key’ fundamental in the creation of market tightness, which spurs new development of additional apartments. Cities have always had a larger renter base when compared with suburban areas, in part because the cost of owning a home close to jobs is out of reach in many cities.
Another reason for the continued demand for multifamily units is the tighter restrictions on mortgages and large down payments. Add to that the tendency for millennials to delay homeownership and it’s easy to see that the demand is likely to be steady and perhaps grow in the next few years.
While they may delay ownership, more millennials may be ready to start their own households, further increasing demand for rental units. As many as a third of millennials currently live with their parents according to reports, including this Pew Research Center analysis. When their job prospects improve or living at home becomes unattractive, they may join their peers in the rental market. Investors should expect more demand for multifamily housing, particularly in areas that attract early career workers including central city districts and attractive, urban-style planned communities. Other factors enhancing the demand to rent in these cities include the expectation of strong amenities, the desirability of the community, walkability, flexibility and convenience. For the money, renters can check all the boxes they otherwise wouldn’t be able to in buying a home close to work. The product that developers build in urban markets allows a person to have everything they want with the ability to move to a new city for a career opportunity without the burden of having to sell a condo or townhouse. .
Prospective multifamily residents will want housing close to their jobs, but with new submarkets where employment is growing some desirable areas may not yet have the necessary inventory in place. Developers study and know their product and timing very well. Their success depends on knowing their target renters’ wants and needs, the present and future supply as well as a host of many other variables to make prudent development decisions. .
Drake Realty Group helps clients procure multifamily assets in growing markets, including Dallas, Houston, Austin, San, Antonio, Atlanta, Phoenix, Denver, Tampa and other major markets across the U.S.