Hints of Growth in Typical Multifamily Unit Size

An elevated market share for rental multifamily homes is holding typical new apartment size below levels seen during the housing boom. However, as multifamily developers build more for-sale housing units in the years ahead, the average size of multifamily homes is likely to rise. The recent pattern of change in the size of new multifamily units stands in contrast to the post-recession increase in the size of typical new single-family homes.

According to fourth quarter 2014 data from the Census Bureau and NAHB analysis, the average square footage of multifamily housing construction starts was 1,355, a significant jump that may be revised in the future. One quarter’s worth of data is not sufficient to suggest a change in trend. The median was 1,085 square feet.

MF unit size

Because the quarterly data are volatile, it is worth examining the numbers on a one-year moving average basis. For the fourth quarter of 2014, the one-year moving average for the multifamily size was 1,286 square feet, while the median was 1,077.

The median is somewhat less than 2% higher than the post-recession low, although the average is now almost 9% higher. The growth of the average may be a sign of changing market mix, although additional data are needed to confirm.

The typical size of newly built multifamily units remains well below the averages/medians recorded during the boom years, when the share of for-sale multifamily was considerably higher. The share of multifamily housing starts built for-rent fell to a historical low of 47% during the third quarter of 2005. It is currently (90%) above the approximate 80% share recorded during the 1980-2002 period due to the ongoing surge in rental demand.

MF built for rent_4q_14

The reason for some of the recent change in multifamily average size is due to market mix. Renters tend toward smaller units than owner-occupiers. In 2012, for example, the median size of all multifamily units completed was 1,098 square feet. However, for rental apartments the median was 1,081, while it was a larger 1,466 for condos.

As the for-sale share of multifamily returns back to historical norms in the years ahead, the size of a typical newly built multifamily housing unit will rise as well.



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