Multifamily construction proposal activity sees modest rebound in Q2 2020

The design and construction outlook for Multifamily Housing is again moving in the right direction, according to the PSMJ Resources’ Quarterly Market Forecast (QMF). 

After a first quarter that saw the multifamily market suffer its lowest level of proposal activity in nearly a decade, PSMJ’s quarterly survey of architecture, engineering, and construction firm executives reported a +7% net plus/minus index (NPMI), up from the -2% recorded in the first three months of the year.

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 AEC industry since its inception in 2003. A consistent group of over 300 firm leaders participate regularly, with 171 contributing to the most recent survey.

As unimpressive as multifamily’s second quarter NPMI is—particularly considering that it experienced seven consecutive years of quarterly NPMIs above 40% through the end of 2019—the upturn is significant. The market’s negative NPMI in the first quarter was its lowest since it capped 11 consecutive quarters of negative proposal opportunity growth with a -5% in the third quarter of 2010.

Multifamily Housing Market Proposal Activity – 1Q08 to 2Q20 (NPMI)

The multifamily rebound was part of overall improving conditions for most of the Housing market. Even with the COVID-19 crisis slowing down the overall economy, housing’s rebound may be driven  in part by historically low mortgage interest rates. 

Housing’s NPMI increased from -19% in the first quarter to +2% in the second quarter, making it one of only four major markets with a positive NPMI among the 12 assessed in PSMJ’s QMF. Water/wastewater (20%), energy/utilities (15%) and healthcare (10%) were the others.

Among the firms that work in the multifamily sector, 31% said that proposal activity increased in the second quarter, while 24% said it decreased. The remainder said the market was relatively flat.

PSMJ Senior Principal David Burstein, PE, AECPM, predicts that single-family housing will rebound faster and stronger than multifamily in the coming months. 

“Overall, the housing market is very strong,” says Burstein. “For many years, this market has been dominated by multifamily housing as people moved into cities. Recently, that trend has reversed. Single-family housing in suburbs is now stronger than multifamily housing in large cities. This is even more true for new condominiums than for new apartment rental housing.”

Among housing’s other submarkets, single-family properties (individual) saw its NPMI improve from -31% in the first quarter to +9 in the second quarters. 

Single-family developments remained well into the negative at -12%, but that was up from -28%. 

Senior/assisted living ticked up from -3% to -1%, while condominiums continued to struggle (-28% in Q1 to -26% in Q2).