Zonda managing principal Kimberly Byrum says she is seeing the best apartment market fundamentals in her 30-plus-year career in the multifamily industry.
“We think it’s smooth sailing for the next couple of years,” she says. “We don’t see any changes other than we probably need more product to meet the demand.”
Byrum outlined the latest multifamily market fundamentals and trends from the COVID-19 pandemic in a recent webinar for Zonda, Multifamily Executive’s parent company.
For supply and demand conditions, traditionally the industry had been running around the pace of 300,000 units absorbed and built on an annual year-over-year basis looking back to 2016, according to Byrum. The absorption figures dropped in the second and third quarters of 2020 when things came to a standstill due to the pandemic, but beginning in the second quarter of 2021, the industry has seen a jump. Year over year, she notes the industry is sitting at 600,000 units absorbed as of the third quarter.
For multifamily deliveries going forward, Byrum predicts they will hit around 270,000 units this year, just under the 300,000 watermark that has typically been seen.
“We have seen about a three-month slippage in deliveries based on municipalities not being available and the catchup as it relates to the lockdowns,” she says. For 2022, she is forecasting around 300,000 deliveries and a little over that figure for 2023.
Occupancies are at an all-time high, reaching 97% at the national level—above the 95% mark pre-pandemic. In addition, third quarter renewal rates are exceeding the 52% benchmark in almost all markets.
Byrum also notes that Texas markets like Houston, Dallas, and Austin; Charlotte, North Carolina; Denver; Nashville, Tennessee; and San Diego have been some of the markets that have benefited the most from the pandemic’s migration trends.
Other highlights from Byrum’s webinar include:
- The REITs are returning to the Sun Belt states. A lot of the migration already had been happening, but the pandemic certainly accelerated that. Byrum says lower regulatory risks and favorable business environments are most appealing about these locales; however, the supply growth is always a risk.
- Several larger developers, such as Trammell Crow Residential, LMC, Alliance Residential, Kennedy Wilson, and AvalonBay Communities, have created brands to focus on middle-market attainable housing. Byrum says this new product is typically garden-style communities located in suburbs or tertiary markets. Design is usually simplified, with two to three floor plans, basic amenities, or sometimes no services. The target aims to be 15% to 20% lower than market-rate.
- Single-family rentals, or horizontal apartments, continue to maintain the pricing edge. Byrum says one new trend she is seeing is an increase in project sizes from the 150- to 170-home range to 250 to 300 homes planned in newer projects. “We’re also seeing people integrate duplex and townhome designs into the product, and as the luxury multifamily builders get into this business, which they are, we are also starting to see some larger unit sizes,” she says. “Amenities are important, especially when you are competing with the multifamily sector. It’s a matter of land since you want to maximize your density. You are asking $500 more than a multifamily community so you need to have some competitive amenities, such as a fitness center and a pool.”
About Real Estate Intelligent Marketing (REIM):
REI Marketing is an innovative Real Estate Marketing Company that offers distinctive real estate services to developers and multifamily investors. We are a vibrant, dedicated team of industry professionals with international experience in marketing and multifamily investment.