Multifamily experts were optimistic about prospects for the sector at the midyear forecast at the National Association of Real Estate Editors conference in Atlanta. Most locations won’t overbuild, single-family rentals are not overtaking the market and the Millennial generation is likely to usher in a longer-term interest in renting by choice, they said.
Speakers Mark Obrinsky, vice president of research & chief economist for the National Multi Housing Council, and Greg Willett, vice president of research and analysis for MPF Research, agreed that the forthcoming need for multi-family rental units will be 300,000 to 400,000 per year. That’s down from 600,000 in the early ‘80s and 900,000 in the early ‘70s, Obrinsky noted, but the number of units under construction is reflecting that reduced pace of growth. Developers are delivering 150,000 this year, according to Willett, and with about 275,000 currently under construction, the number delivered next year will likely rise to only about 200,000 to 225,000. Willett acknowledged there are some spots in danger of being overbuilt but said they are very limited. He named as examples Washington, D.C., and Raleigh, N.C.
While the single-family rental market has attracted a lot of attention recently as institutional investors have taken an interest, Obrinsky pointed out that as a competing asset class it has not changed. A study released yesterday by ORC International for MemphisInvest.com and Premier Property Management Group reported single-family rental growth of 25 percent since 2005 according to Zelman & Associates and 22 percent since 2006, according to the Census Bureau (whose most recent number for occupants is 11.4 million). But Obrinsky noted that their share of the total rental market has only grown from 30 percent in 2000 to 33 to 34 percent today. Furthermore, he emphasized, they tend to attract a different demographic than apartment units.
The 20-to-34-year-old demographic group that is a big—and currently one of the fastest-growing—segment of apartment renters is four million larger than it was 10 years ago, Willett said, despite the fact that young college graduates are living at home longer. This trend is reflected in the rise in the number of one-bedroom and studio units, noted Robert Hart, president of KW Multifamily Management Group. The ever-longer delay in marriage is also promising for apartments, Willett said, since that number is up by 9 million. Marriage tends to be a big impetus to consider alternative housing options.
While the Great Recession may deter some would-be homebuyers, it will not likely prove to have a big impact, Obrinsky said. More influential will be Millennials’ greater interest in renting across many aspects of their lives—from homes to cars to bicycles. For some, that’s driven by finances, while for others it’s a lifestyle choice that may or may not remain important to them as they grow older.
