Apartment Demand Still Exceeds Deliveries
Recent apartment construction far exceeds construction seen in the previous decade. But apartment demand is even stronger, said Berkadia and Realpage.
The Berkadia-Realpage Apartment Advisory report said recent deliveries will push the total number of multifamily completions since 2010 to 2.3 million units, roughly 500,000 units more than delivered in the nation’s top 150 markets between 2000 and 2009. “Perhaps even more remarkable is that apartment demand has been even stronger,” the report said, noting 2.6 million units have been absorbed since 2010–about 300,000 more units than have been built.
“There are many factors driving stronger apartment demand,” the report said. “There has a been population swell among young adults and homeownership rates remain below historic norms. Those factors contribute to the number of people who want to rent an apartment.”
Job creation also adds to the number of people who can afford to rent an apartment, and the economic cycle has yielded nearly 21 million new jobs, the report said. U.S. employers have added jobs for 110 consecutive months as of November.
“The confluence of strong employment growth and various lifestyle choices that make renting preferred has driven overall strong demand in many local markets as well,” the Apartment Advisory report said. “Unsurprisingly, the top 10 markets for demand this cycle are also among the nation’s biggest employment growth markets.” It noted four markets–Dallas-Fort Worth, Houston, New York and Washington, D.C., each absorbed well over 100,000 new units during this cycle. Another three markets absorbed between 70,000 and 100,000 units: Atlanta, Los Angeles and Seattle. Chicago, Phoenix and Austin also represented key demand centers by absorbing more than 65,000 units each.
“In most of these top demand markets, apartment absorption has tended to exceed building volumes, even though the construction figures have been big,” the report said. “The only spots where demand has come up a bit short are Washington, D.C., and Seattle. In D.C., the difference is large enough to perhaps make an argument that the market has been overbuilt, at least in the short term.”