Multifamily Construction Remains a Built-for-Rent Market


An elevated rental share of multifamily construction is holding typical apartment size below levels seen during the pre-Great Recession period. As multifamily developers build more for-sale housing units in the years ahead, the average size of multifamily homes is likely to rise.

According to third quarter 2018 data, the average per unit square footage of multifamily housing construction starts was 1,125, off from the post-recession high set at the start of 2015 (1,247 square feet). The median was 1,104 square feet for the third quarter.

Because the quarterly data are volatile, it is worth examining the numbers on a one-year moving average basis. For the third quarter of 2018, the one-year moving average for multifamily size was 1,127 square feet, while the median was 1,085. The current quarterly median and average are 3% and 1% higher, respectively, than post-recession lows. Nonetheless, the typical size of newly built multifamily units remains below the average/median recorded during the pre-recession years, when the share of for-sale multifamily was considerably higher.

The market share of rental multifamily construction starts ticked up to 95% during the third quarter of 2018. In contrast, the historical low share of 47% was set during the third quarter of 2005, during the condo building boom. The average share of 80% was registered during the 1980-2002 period. There were only 23,000 multifamily condo units that started construction over the last year, relatively unchanged compared to the four quarters prior to that period.

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