By Keith Loria, Contributing Editor
TD Bank released its Regional Multifamily Housing Outlook, examining the outlook for multi-family housing investment in 10 major metropolitan areas along the eastern seaboard from Boston to Miami.
The report shows that the housing recovery has been dominated by the multi-family sector, both in construction activity and price growth. Over the last four years, multi-family housing starts have risen 350 percent, as the recession pushed many homeowners to renters.
“After five years of drought, multi-family starts are beginning to meet demand,” Gregg Gerken, TD Bank’s senior vice president & head of U.S. commercial real estate lending, told Commercial Property Executive. “The markets that have the highest upside are those markets that had the largest decline, due to more room for recovery.”
According to the report, the sector saw increased demand since 2009 and will continue to see this pattern as 35 percent of new households are expected to be renters, most typically residing in multi-family residences.
“It is not difficult to find the reason for the rebound in multi-family housing. The recession and foreclosure crisis turned homeowners into renters, and renters are much more likely to live in multi-family dwellings, according to the report. “At the same time, credit constraints limited the pool of first-time homebuyers, leaving them either staying at home or renting.”
TD’s report reveals that southern markets, including those hit hardest by the recession, have the most upside, while large markets including Boston, New York and Washington, D.C. should continue to see demand due to population growth.
“The large markets are seeing increased demand because they have the largest number of household formations,” Gerken added. “Other housing trends are a slow and steady recovery in the for sale housing markets, with a decreasing number of homes on and days on market and price appreciation.”
In examining Boston, the report showed the number of vacant apartments available for rent sits at 13,500 units, a slight decrease below its historical average of 13,900. Additionally, a wave of 11,400 new construction units are expected to make their way onto the market by the end of 2015.
In New York, demand for apartments has increased to an average of 10,900 units, a sharp increase of the historical annual average of 6,300. For 2014 and 2015, report analysts anticipate construction of new apartment units to total 10,000 and 10,500, respectively in the Big Apple.
According to Gerken, Baltimore and Philadelphia have not been as strong because of negative population growth, lower than average job growth, less relative household formation growth and affordable homeowner alternatives.
In fact, in the metro Philadelphia area, the report forecasts that population growth will average an annual rate of 0.5 percent, which is 0.3 percentage points lower than the national average. So, it’s unlikely that the favorable near-term supply shortage dynamics in the renters market will be sustained.