flexiblefullpage -
billboard - default
interstitial1 - interstitial
Currently Reading

Multifamily holds strong – for now

Multifamily holds strong – for now

Metrics suggest elevated activity to continue, but questions linger.


By The Jagg Group | August 16, 2022
Struggling Multifamily Sector
Courtesy Pexels.

All leading indicators show that the multifamily sector is shrugging off rising interest rates, inflationary pressures and other economic challenges, and will continue to be a torrid market for design and construction firms for at least the rest of 2022.

CBRE reported that Multifamily remained the most preferred commercial real estate sector for investment in the 2nd Quarter, with a 32% year-over-year increase in volume to $78 billion, and the Federal Reserve reported strong multifamily results across all districts in its 2022 July Beige Book. At the same time, Rent.com reported that year-over-year rents grew 25.3% and 26.5% for one- and two-bedroom apartments, respectively,  and the U.S. Census Department announced that apartment vacancy rates remained near record lows (5.6% in the 2nd Quarter of 2022).

The PSMJ Resources Quarterly Market Forecast (QMF) survey of architects, engineers and contractors reinforces this view. While more than two-thirds (67.2%) of the firm leaders surveyed said that proposal activity in the multifamily market increased from the 1st Quarter of 2022, only 6.3% reported a decline. The resulting net plus/minus index (NPMI) of 60.9 – which is the delta between the percentage of respondents seeing a rise and fall in proposal activity – is down from the record-setting 1st Quarter NPMI of 82.4, but is still among the best quarters since PSMJ began measuring proposal opportunities in submarkets in 2006.

Multifamily Proposal Activity
Courtesy The Jagg Group.

PSMJ Director and Senior Consultant David Burstein, PE, acknowledges the current strength of the entire housing market, but expects a turnaround in the not-too-distant future, albeit a minor to moderate one. “The housing market, including multifamily housing, has been red hot. But it may be on the verge of cooling off a bit,” he says. “A recent analysis by CNBC indicated that the average mortgage payments for a house purchased in 2019 was $1,192 per month. With the increase in home prices and interest rates, the mortgage on that same house is now $1,991 – an increase of almost $800 per month. Wages have gone up since 2019, but they haven’t gone up enough to account for that difference in mortgage costs. The net result will be fewer families able to afford a new home.”

This will have an impact on multifamily as well, adds Burstein. “The increase in interest rates also affects developers’ ability to finance new multifamily rental buildings. And the Fed has indicated that they aren’t close to topping out on their rate increases. So I expect the pace of new multifamily to slow significantly in the next few months. And those projects that do move forward will probably be for lower-cost properties.”

To Burstein’s point, the National Association of Home Builders (NAHB) Multifamily Market Survey weakened in the 1st Quarter of 2022 (the latest figures available), with confidence in market-rate rentals and for-sale apartments sliding. Only lower-rent properties supported by government programs showed a small increase in confidence among the builders responding to the survey.

Despite this caution, the forward-looking QMF survey also anticipates relatively healthy futures for two other multifamily submarkets it measures – condominiums and senior/assisted living. 

Condominiums recorded an NPMI of 47.9 in the 2nd Quarter of 2022, its second-highest reading ever. Only the 2nd Quarter of 2021, when condos scored an NPMI of 59.2, was better. More than 54% of respondents working in the condo market saw higher proposal activity in the 1st Quarter, compared with about 6% that saw a decrease.

Proposal opportunities in senior/assisted living facilities also impressed, recording an NPMI of 58.8 – 62.7% saw an increase in activity, while only 3.9% reported a decline.

PSMJ has been conducting the Quarterly Market Forecast survey of its members since 2003. The A/E/C consulting and publishing company chose proposal activity as the basis for its QMF because it represents the earliest stage of the project lifecycle. For more information, go to  https://www.psmj.com.

Related Stories

Multifamily Housing | Sep 15, 2022

Toronto’s B-Line Condominiums completed using prefabricated panels

B-Line Condos, Toronto, completed using Sto Panel Technology.

Multifamily Housing | Sep 15, 2022

Heat Pumps in Multifamily Projects

RMI's Lacey Tan gives the basics of heat pumps and how they can reduce energy costs and carbon emissions in apartment projects.

Multifamily Housing | Sep 14, 2022

27 new kitchen and bath products multifamily developers and AEC teams are using for the first time

Multifamily developers and AEC project teams are adopting new kitchen + bath products and systems for the first time, according to the MULTIFAMILY Design+Construction Kitchen+Bath Survey 2022.  

Multifamily Housing | Sep 13, 2022

Exclusive Multifamily Kitchen + Bath survey – Specifiers ask: "Where are all the refrigerators?"

Preliminary results of 2022 Multifamily Design+Construction exclusive Kitchen + Bath survey.

Senior Living Design | Sep 8, 2022

What’s new with AQ: The top trends in active adult living

Today's 55-or-better buyers are ready to design their lives and their homes as they see fit. With so much growth on tap, builders and developers must stay apprised of trends related to home, environment, and culture of 55+ communities.

Mass Timber | Aug 30, 2022

Mass timber construction in 2022: From fringe to mainstream

Two Timberlab executives discuss the market for mass timber construction and their company's marketing and manufacturing strategies. Sam Dicke, Business Development Manager, and Erica Spiritos, Director of Preconstruction, Timberlab, speak with BD+C's John Caulfield. 

Giants 400 | Aug 29, 2022

Top 50 Senior Living Facility Contractors + CM Firms for 2022

Whiting-Turner, Ryan Companies US, W.E. O'Neil Construction, and KBE Building Corp. top the ranking of the nation's largest senior living facility contractors and construction management (CM) firms for 2022, as reported in Building Design+Construction's 2022 Giants 400 Report.

Giants 400 | Aug 29, 2022

Top 80 Senior Living Facility Architecture + AE Firms for 2022

Perkins Eastman, Hord Coplan Macht, Ryan A+E, and Stantec top the ranking of the nation's largest senior living facility architecture and architecture/engineering (AE) firms for 2022, as reported in Building Design+Construction's 2022 Giants 400 Report.

Giants 400 | Aug 29, 2022

Top 30 Senior Living Facility Engineering + EA Firms for 2022

WSP, Olsson, Kimley-Horn, and KPFF Consulting Engineers top the ranking of the nation's largest senior living facility engineering and engineering/architecture (EA) firms for 2022, as reported in Building Design+Construction's 2022 Giants 400 Report.

boombox1 - default
boombox2 -
native1 -

More In Category




halfpage1 -

Most Popular Content

  1. 2021 Giants 400 Report
  2. Top 150 Architecture Firms for 2019
  3. 13 projects that represent the future of affordable housing
  4. Sagrada Familia completion date pushed back due to coronavirus
  5. Top 160 Architecture Firms 2021

 



Magazine Subscription
Subscribe

Get our Newsletters

Each day, our editors assemble the latest breaking industry news, hottest trends, and most relevant research, delivered to your inbox.

Subscribe

Follow BD+C: