Multifamily demand may slip a bit as hiring dropped substantially in the second quarter of this year, according to a report.
This is the third consecutive year that hiring has slowed at the onset of summer, according to Marcus & Millichap. Employers have been stalled by the European economy, concerns over changing regulations and other factors. Job creation may improve as there is some optimism due to the prospect of potential improvements in these underlying causes. Commercial real estate activity has remained fairly strong despite these issues.
In the multifamily sector, the formation of new rental households continues. Young adults and former homeowners are still adding to the demand for apartments, occupying an additional 25,000 units in the second quarter. That caused the national vacancy rate to fall to 4.7 percent, the firm reports, the lowest level seen in over a decade. Absorption may slow due to the drop in hiring, however.
Because of the strong fundamentals, the multifamily sector saw further rent growth on top of what has taken place in recent years. Effective rents went up 1.2 percent in the quarter. There are significant differences between localities, but the sector continues to be a bright spot in the real estate industry. Rental property management companies and other stakeholders are well-positioned even if the market's pace slows.