Multifamily Development Is a Major Trend For 2015

December 18, 2014

Analysts are predicting more new jobs with the turn of a new year. That means more people will be ready to move out of their parents’ or roommates’ and into their own multifamily household. These job seekers are ready to rent but not ready to buy, which means more growth for the multifamily sector.

“Renters are still facing economic ambiguity, and the speed at which they are coming into the rental market is still greater than the rate that they are becoming home buyers,” said CoStar director of U.S. research, multifamily Luis Mejia. “The economy is strong enough to push renters into the rental pool, but not strong enough to promote home ownership, a double benefit to the apartment market.”

According to National Real Estate Investor, developers are ready to keep up with growth. The 2015 2015 Dodge Construction Outlook estimates commercial real estate developers will break ground on 405,000 units of multifamily housing next year. To put things in perspective, from 2012 through 2014 approximately 296,000 apartments were completed annually.

The increase in apartment supply will most likely decelerate rent increases to below 2% in 2015. However, CoStar remains optimistic about the projections, “The U.S. apartment vacancy rate will rise from the current 4.1% to over 5% by the end of 2015. Although a significant trend shift, apartment vacancies are still expected to remain near 10-year lows across most of the nation, even with the addition of hundreds of thousands of new units.”

It’s a smart time to invest in multifamily development because demand is high and access to financing is becoming more available.

Robert Murray, chief economist and vice president with Dodge Data & Analytics attributed this to, “a greater focus on real estate development by the investment community and more construction bond measures getting passed. Interest rates for the near term should stay low.”

If you’re interested in discussing commercial real estate development opportunities in St. Louis and the Midwest region, get in touch with our Construction and Development Services Team. We’ll help you identify the most strategic investments for your business.