As multifamily construction continues to show strength, the composition of apartment development has been evolving. Typical unit size remains below levels seen during the housing boom, and this change is associated with a rise in the market share of one-bedroom apartments.
In a prior post, we examined the multifamily trend of an increasing share of units located in large buildings (properties with 50 or more units). In a related set of changes, there has been a rise in the share of one-bedroom apartments in new multifamily developments (defined as units in properties with two or more units).
According to NAHB analysis of Census Survey of Construction data, the market share of multifamily completions of units with two or more bedrooms reached a data series low in 2014. For 2014, 53% of new multifamily units placed into service possessed two or more bedrooms, down from 69% ten years ago. Except for a brief rise during 2011 and 2012, the market share of larger units (as measured by number of bedrooms) has been declining since 2005.
According to the Census data, there were 264,000 multifamily unit completions in 2014. Of that total, 14,000 were efficiencies, 111,000 were one-bedroom units (42%), 108,000 were two-bedroom apartments, and 31,000 residences had three or more bedrooms. The 42% share is up from 29% from ten years ago.
Given the typical multifamily project takes more than 13 months to complete construction after obtaining authorization, the 2014 completion data reflect projects permitted in 2012 and 2013. Due to ongoing strong demand for rental properties, particularly among younger households, the trend of smaller units is likely to hold for 2015 and 2016 completions.