Multifamily Construction Continues to Cast Shadow over Single-Family HomesNovember 7th, 2014 by Editor
As the construction industry continues its recovery, the single-family and multifamily housing sectors have been in a battle. Because of certain economic and sociological conditions, multifamily has gotten the best of the fight so far.
Dodge Data & Analytics released its 2015 Dodge Construction Outlook Thursday at a conference in Washington, D.C. According to the Outlook, with the exception of manufacturing buildings, multifamily housing has by far made the largest and most consistent improvements year-after-year in all of the building industry since 2010, growing at least 22 percent to 37 percent in each year.
In fact, the 22 percent growth in 2014 in terms of multifamily housing starts was its lowest since 2009, and Dodge projects that number down to a 9 percent growth next year. “Market fundamentals such as occupancies and rent growth continue to be supportive,” reads the Outlook, “although the rate of increase for construction is now decelerating as the multifamily market matures.”
According to Dodge chief economist and vice president Robert A. Murray, apartments led the early upturn of multifamily housing, but now condominium development has made its way back. He notes that the continued trend in multifamily growth has been helped by the push for downtown redevelopment and millennials’ tendency “to move into an apartment in the city.”
Also, the recession and the slow economic recovery—paired with student loan debt—has directed millennials away from home-buying. That trend has hurt the single-family housing market but has helped multifamily.
The Dodge report notes that “a historically large share of millennials could remain renters for longer than average.” Because of both economic factors and a stronger desire for urban lifestyle, Murray writes that “a larger share of this generation could remain renters by choice, particularly since they grew up fully aware of the uncertainties of investing in housing.”
Big Apple, Bigger Buildings
With the strong push in multifamily construction has come some major projects—particularly in New York City. Actually, almost exclusively in New York City.
In terms of dollar value, eight of the 10 largest projects in 2014 are located in NYC, led by the $718 million residential portion of the Nordstrom Tower in Manhattan. That project is followed by jobs of $425 million, $420 million and $395 million. The two non-NYC projects in the top 10 are located in Astoria, N.Y., and Jersey City.
“New York City is certainly the center for multifamily housing,” says Murray.
While the multifamily sector is hogging much of the spotlight, the Dodge expects single-family housing starts—which gained 4 percent in 2014—to jump 15 percent in 2015.
“It’s expected that access to home mortgage loans will be expanded, lifting housing demand,” says Murray. “However, the millennial generation is now only gradually making the shift toward homeownership, limiting the potential number of new homebuyers in the near future.”
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