Census statistics on new multifamily product characteristics provide quantitative support for well known trends and insights into less discussed trends.
The statistics paint a picture of several key aspects of multifamily’s evolution over the past two decades.
The first major characteristic is that development of rental product —vs. for-sale— has become far more dominant in recent years. In 2018, rental completions totaled 318,000 units or 92.2% of all multifamily (345,000 units). Similarly, in the 2010-2018 period, rental product represented 92.5% of all multifamily completions, compared to 73.8% in the 1999-2009 period.
It is notable that over the last three years, there has been a modest rise of new condo construction, and we expect that trend to continue.
Mid-Rise/High-Rise Still Dominates
Garden-style development appears to be on the rise in 2019. Yet that trend was not apparent in 2018 Census data (using the one-to-three-floors category as a surrogate for garden). Last year, garden represented a moderate 37.7% (120,000 units) of all rental completions, down from 2017. In the 1999-2009 period, 80.2% of all rental completions were garden. In the 2010-2018 period, garden represented 51.6%.
While mid-rise and high-rise develop- ment has dominated over the past decade, Census data clearly shows that garden-style development has played a significant role over the past decade, a somewhat overlooked trend.
Unit Sizes Increase in South & Midwest
Unit sizes are growing nationally and in the Midwest and South (even though this seems at odds with increased percentages of efficiencies and one-bedroom units). The 2018 data reveals lower percentages of smaller units and higher percentages of larger units.
At least in the Midwest and South, developers are building larger units likely in response to changing market demand (due to older residents and longer tenure in multifamily housing).
The share of smaller units has risen in the Northeast and West. High housing costs in both regions and the higher percentage of mid-rise/high-rise development in the Northeast (84.4% in 2018) partly explain the regional differences.
One-Bedroom Units’ Share Rises to 45%
One-bedroom units’ market share has been inching up steadily this decade, reaching 45% in 2018. Efficiencies has also been rising as a percentage of all units delivered. Their rising market shares are a response to higher development costs, higher rents and higher density product.
The increase in one-bedroom and efficiency deliveries is also a response to household size demographics. In 2018, one-person households represented over one-quarter (28%) of all U.S. households regardless of housing choice. Two-person households have also been rising steadily and represented 34.5%.
Two-bedroom units’ market share has been edging down over the past decade. The market share of three-bedroom units has declined even more, falling from the 1999-2009 average of 16.4% to only 8.5% in 2018.
Development has never been oriented to families, but the declining market share of two- and three-bedroom units makes it harder for families to find acceptable multifamily housing.
The data also suggests that, despite an interest in attracting empty nesters, the industry is not widely building product for these new potential renters.
By Jeanette Rice, Americas Head of Multifamily Research, CBRE.