Multifamily Built-for-Rent Share Remains Elevated


An elevated rental share of multifamily construction is holding typical apartment size below levels seen during the pre-Great Recession period. If multifamily developers build more for-sale housing units in the years ahead, the average size of multifamily residences is likely to rise. However, recent trends suggest continued low levels of condo construction ahead.

According to first quarter 2019 data, the average per unit square footage of multifamily housing construction starts was 1,137, off from the post-recession high set at the start of 2015 (1,247 square feet). The median was 1,063 square feet for the first quarter of the year.

Because the quarterly data are volatile, it is worth examining the numbers on a one-year moving average basis. For the first quarter of 2019, the one-year moving average for multifamily size was 1,135 square feet, while the median was 1,097. The current moving-average of median size is 4% higher than the post-recession low, while the four-quarter average measure is near a post-recession low. Moreover, 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 held at 94% during the first quarter of 2019. 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 24,000 multifamily condo units that started construction over the last four quarters, just slightly higher compared to four quarters prior to that (22,000).

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