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Multifamily Construction Update (November 2020)

Multifamily construction delays continue to impact the industry, largely due to permitting delays and a lack of materials. Markets known for outsized 2010-2020 deliveries have seen significant decreases, with markets like Denver down 51% year-over-year. One pre-covid trend that might persist in 2020 and beyond: recent data shows that in 2019 smaller multifamily buildings gained a meaningful share of the overall new construction market.

Below are key takeaways from the following reports:

NMHC Multifamily Construction Survey Indicates Persisting Construction Delays – YieldPro Link

US Construction is Down, Denver Decreases 51% – CREJ Link

Smaller Multifamily Buildings Gain Market Share in 2019 – National Association of Home Builders Link

Download the PDF version of this report here:

NMHC Multifamily Construction Survey Indicates Persisting Construction Delays

YieldPro

  • Although construction delays have remained consistent throughout the pandemic, respondents reported a greater impact on the availability and price of materials
    • More than half (57%) reported construction delays
    • Of this group, 90% reported delays in permitting due to COVID-19
      • Greatest share to indicate delays since the inception of the survey in late March
    • 77% indicated a significant pause in starts
      • The primary reasons were permitting, entitlement and professional services (67%); economic uncertainty (58%); and availability of construction financing (46%).
    • Over three-quarters (80%) reported a lack of materials
      • An increase of 44% points since the last round and by far the highest share recorded since the survey began

US Construction is Down, Denver Decreases 51%

CREJ

  • Nationwide, apartment construction is experiencing a considerable slowdown this year with 293,000 new apartments projected to hit the market
    • 12% drop compared to last year’s deliveries
    • The decline is primarily due to fewer construction crews and permits, coupled with reduced funding and temporary bans on construction due to the COVID-19 pandemic
  • Compared to last year, 13 of the 20 most-active metros are witnessing a slowdown
    • Denver was surpassed only by the Miami metro

U.S. Construction is Down, Denver Decreases 51%

Smaller Multifamily Buildings Gain Market Share in 2019

National Association of Home Builders

  • Data from the 2019 Census Bureau Survey of Construction (SOC) show a gain in the number of multifamily units built in smaller properties, reversing a trend that favored larger buildings over recent years
  • The number of multifamily units completed in buildings with 9 or fewer units and 10 to 29 units increased in both relative and absolute terms in 2019
  • The number and percentage of multifamily units completed in buildings with 30-49 units or 50 or more units decreased
  • Development of smaller multifamily properties, such as duplexes, quadraplexes and detached townhomes also reflects the burgeoning “light-touch” density housing market, which are also the “missing middle” market in America
    • Restrictive zoning laws that ban the missing middle may have an outsized impact on housing underproduction, according to a study by AEI