Change may be coming to the multifamily market as increased construction permits and starts signal the beginning of a more intense period of development.
After years of low or no growth in many markets, the surge in supply of available units is expected to begin in 2013 and may continue for some time, according to the Costar Group. This is likely to halt, and possibly reverse, declining vacancy rates and spikes in rent growth in many areas. Coupled with improvements in the single-family housing market, the multifamily sector is expected to reach something closer to its past equilibrium and return to a more normal state.
The intensity of renter demand should decline. All of these developments represent the next natural stage in the multifamily industry's economic and development cycle, Costar's analysis indicates. That suggests that the results should be balanced. While rental property management firms and other stakeholder may find profits drop somewhat, the industry's position is not expected to deteriorate.
About 60,000 new apartment units are expected to come online this year, the firm projects. While that remains below the long-term average, permits and construction starts have accelerated significantly. Supply may be between 100,000 and 130,000 from 2013 through 2015, which should balance supply and demand, the firm anticipates.