No End in Sight for Strong Demand for Class-A Multifamily Units
May 19, 2022 | Bendix Anderson | WealthManagement.com
Developers simply cannot build enough new, luxury apartments to fill existing demand, contributing to double-digit rent increases in many U.S. markets.
This is despite the fact that developers are on pace to finish more luxury apartments in 2022 that they have in decades—but renters are expected to fill them up, even as rents continue to rise. Economists—so far—are also not worried that developers will eventually build more apartments than the current demand calls for. Instead, they worry about how long the U.S. economy will continue to run so hot—creating new households and new demand for housing.
“Rent growth will not materially slow down until demand cools and vacancy ticks up, which will happen if and when affordability becomes a headwind or if the job market stumbles,” says Jay Parsons, vice president and head of economics and industry principals for RealPage, based in Richardson, Texas. “The worst-case scenario is a slowing job market that stagnates wages, while other consumer expenses continue to surge.”
Not building enough apartments for an overheated economy
Even though developers opened hundreds of thousands of new apartments in 2021, vacancy rates continued to shrink and rents continued to swell.
“The shortage of luxury apartments has become particularly acute over the past year,” says John Sebree, senior vice president and national director of Marcus & Millichap’s Multi Housing Division, working in the firm’s Chicago offices.
