Multifamily Construction: 4Q16

An elevated market share for new rental multifamily homes is holding typical apartment size below levels seen during the pre-recession period. 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 2016 data from the Census Bureau and NAHB analysis, the average per unit square footage of multifamily housing construction starts was 1,199, off from the post-recession high set at the start of 2015 (1,247 square feet). The median was 1,136 square feet for the fourth quarter.

Because the quarterly data are volatile, it is worth examining the numbers on a one-year moving average basis. For the fourth quarter of 2016, the one-year moving average for the multifamily size was 1,175 square feet, while the median was 1,102. The current quarterly median is 4% higher than the post-recession low, and the average is 5% higher. Nonetheless, the typical size of newly built multifamily units remains below the averages/medians recorded during the pre-recession 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 (94%) above the approximate 80% share recorded during the 1980-2002 period due to elevated levels of rental demand.

The reason for some of the 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 for-sale multifamily residences. When 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 accordingly.



Tags: , , , , , ,

Leave a Reply

Your email address will not be published. Required fields are marked *