According to NAHB analysis of quarterly Census data, the market share of rental units of multifamily construction starts declined to 93.4% during the third quarter of 2021. This is the lowest share since the first quarter of 2020. In contrast, the historical low share of 47% was set during the third quarter of 2005, during the condo building boom. An average share of 80% was registered during the 1980-2002 period.
The small market shift occurred as quarterly multifamily condo production increased to 8,000, matching a post-2016 high mark. However, during the last four quarters, there were still only 22,000 condo units that started construction, compared to 21,000 for the prior four quarters.
Regardless, an elevated rental share of multifamily construction is holding typical apartment size below levels seen during the pre-Great Recession period. According to third quarter 2021 data, the average square footage of multifamily construction starts ticked up to 1,053. The median was just 1,000 square feet.
Because the quarterly data are volatile, it is worth examining the numbers on a one-year moving average basis and that trend is declining. For the third quarter of 2021, the one-year moving average for multifamily size was 1,052 square feet, while the median was 1,005. These measures are at more than two-decade lows. However, our forecast is for size to increase as multifamily building moves further out from urban cores as renters seek larger, more affordable housing due to the virus crisis. Gains for condo construction could also lift multifamily unit size.