Multifamily market set for strong demand in 2019
By Steve Randall
Last year saw significant strength in the US multifamily market and the momentum is set to continue in 2019.
A report from real estate due diligence firm BBG notes a 15% jump in apartment transactions in 2018 which totaled almost $168 billion. The 290,300 multifamily units completed in 2018 may not be matched in 2019 but the firm estimates a healthy 280,000.
Young adults are expected to drive demand for multifamily rental units amid growing levels of debt, a desire to remain flexible, a preference for urban core living, and a lack of affordable single-family homeownership options.
"In 2018, multifamily housing had a banner year as a result of a robust economy, a continuing trend of a younger generation continuing to migrate to urban areas and increased investor demand for this asset class,” said Mary Ann Barnett, MAI, BBG Multifamily Practice Leader and Managing Director. “We anticipate that multifamily will remain stable in 2019 as underlying market fundamentals continue to support this market."
Rents keep on rising
With a vacancy rate almost half that of a decade ago – 4.8% compared to 8% - and rising demand, rents have been steadily rising.
BBG also sees emerging trends for the multifamily market with existing properties have increasing in value as it is more expensive to build more product as a result of rising new construction costs, including labor, materials and equipment.
Value add properties are in high demand where moderate to significant renovations can increase rents significantly and repurposed units such as vacant department stores are becoming more common.
Consumer demand is also seeing features added such as pet amenities, common areas that encourage connectivity, and various parking features including electric charging stations, bicycle storage, motorcycle parking, and shared car services located on-site.