Multifamily Rental Demand Catching up to Supply: BarCap
The latest figures on the multifamily sector are improving, according to Barclays Capital, but analysts are still waiting on the fundamentals before calling any recovery. The multifamily net absorption rate, or the amount of space leased after deducting the amount of supply, increased by more than 46,000 units in Q210, the highest increase in 10 years, according to BarCap. The national vacancy rate on multifamily properties also decreased to 7.8% from 8% over the same time: These improvements were not limited to a few regions, either. Occupancy increased in 67 of 92 markets monitored in Q210, and net absorption improved in 71 of 82 areas. But the performance is split between older and new developments. Roughly 70% of the net absorption came from existing buildings leasing empty units. The percentage of units rented in newly constructed buildings remains low at about 50%, down from 65% in 2005 and 2006, according to BarCap. Construction of new multifamily properties is up, though. Permits reached 145,00 at the end of Q210, up 57.6% from 92,000 counted at the beginning of the year. Over the same time, starts on multifamily projects reached 88,000, a 79% increase from 49,000. BarCap analysts said that the positive data has only been seen over the past two quarters. A recovery depends on a continuing decline in homeownership rates and a growing supply of young adults moving out of their parents’ houses. The homeownership rate in the US currently stands at 67.2%, down from the peak of 69% seen in 2005 and 2006. Young adults are renting more, too. Only 59% of those aged between 25 and 29 rented in 2005, down from 66% in 1994. Last year, though, that number increased to 62%. Write to Jon Prior.