Industry Leaders Expect Strong Apartment Demand Through 2020

Experts predict 1% rise in rental starts through 2020, and 4% through 2021, at International Builders’ Show conference.

While apartment vacancies are low and production has returned to pre-recession levels, more new homes will be needed to meet demand in 2020 and beyond, according to industry experts during a press conference at the National Association of Home Builders’ International Builders’ Show in Las Vegas in January.

“Research shows that 22% of young adults—ages 25 to 34—still live with their parents, a trend that will continue to create a drag on household formation in 2020-2025,” says Danushka Nanayakkara-Skillington, assistant vice president of forecasting and analysis at NAHB. “That group’s challenges in looking for an apartment can be attributed to student debt, rising rents, or even competition with seniors who opt to downsize to a smaller home or apartment.”

According to the conference panelists, multifamily housing starts leveled off in 2018 due to material costs, regulatory costs, and the need to pay higher wages to attract and keep workers. This led to a rise in rent, which resulted in fewer affordable apartments and a rise in luxury communities.

However, ongoing demand means developers are continuing to build, predominantly in urban areas. In 2017 and 2018, most new rentals were in communities with more than 50 units, and in 2019 multifamily starts stood at 116% of the national average.

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