The National Multifamily Housing Council brings together the housing industry's most influential owners, operators, presidents, CEOs, and dealmakers to strategize about development, capital, management, construction, design, and operations.
Joe Sinnett, AIA, Principal and Team Leader, and Kelli Zaremba, National Business Development Leader, attended the Council’s annual meeting in Orlando and gathered key points and predictions for the multifamily housing market in 2022.
While labor and supply chain continue to present logistical hurdles, the optimism for the next few years in the multifamily housing market was unanimous. The pent-up demand of households looking to enter the rental market has created a significant need for housing in every segment. While many geographic markets are showing signs of growth, places that have remained open during the pandemic have a significant tailwind.
While downtown areas and larger cities have rebounded, the strongest new development growth is coming from suburban and tertiary markets. Hybrid and remote work incentivized developers and owners to widen the lens to consider sites outside of major metropolitan areas. The pandemic fueled domestic migration, resulting in increased population and opportunities in the southeast and sunbelt states, as well as tertiary markets like Boise, Richmond, and Pensacola.
Moving from the urban core to suburban markets, developers will be required to be creative in storytelling and design to gain community support. While the land costs may be lower outside of metropolitan areas, the threat of NIMBYism is significantly greater.
Outside of location challenges, labor shortages are being felt by all in the construction of multifamily projects. The pressure of the pandemic has accelerated use of technology for planning, construction and for daily operations. Developers and owners will increasingly lean on architects and designers to incorporate process-oriented technology to increase efficiency and sustainability. The demand for tech-savvy partners is growing and will only continue in the years to come.
The housing supply is growing, but not as fast as renters are entering the market. Various panels of experts agree, we are not in a bubble. Strategists repeatedly predicted that stimulus fueled savings growth will smoothly transition to wage growth. Demand for available rental units is currently so strong, that availability is more important than amenities—for now.
Many geographic areas outside of the urban core have historically held a preconceived negative opinion of multifamily housing, but that is starting to change. An influx of baby boomers, Gen Zs, and millennials are fueling a movement of residents who prefer to rent over buying a home. Embracing increased flexibility, renting allows access to lifestyle amenities and the option to move to a new location with no long-term commitment. Adding more multifamily housing options to smaller cities and towns will democratize the way of living for many that would have otherwise been pushed to high density metropolitan areas.
Single family rentals have emerged as one of the largest areas of growth. While the outlook appears positive, it is a newer market, and some developers feel the future of this product type is not totally predictable.
Through data analytics, we can surmise that multifamily renters are using online searches to look at unit layout first, before looking at amenity spaces. This is a significant shift from the pre-pandemic times, where searches based on amenity spaces led the way. Units with home offices, generous closet space and flexible layouts are now the first to lease. Smaller rental units are resulting in higher turnover, forcing owners and developers to look at unit mix and skew towards larger footprints for longer lease periods.
Sound transmission between units remains to be the number one issue plaguing residents and operators. While it may not seem like an amenity, developers that invest in sound deafening measures will be able to highlight this feature for years to come, a lasting impact of brand differentiation.
Delays in supply chain and sourcing are negatively impacting the value-add process. There is an expectation that owners will continue to pull back on projects that involve scarce materials and products, which may create a delay in renovations to existing amenity spaces. If this happens, we can predict another wave of latent demand, due to pent up requests for these items, not from supply chain and logistics.
Higher density buildings that are designed to adeptly manage packages and food deliveries are rising to the top, a trend that will not likely change as residents have grown accustomed to the conveniences of COVID-19 times.
Multifamily investment funds are increasingly looking for development partners that are committed to environmental, social, or governance (ESG) standards. ESG can be many things, for example locating properties in urban locations that are close to public transportation, services, and jobs - which can help with density, and cost of living for the residents. It may mean committing to more affordable units than the required minimum. Developers who look at a model focused on increased sustainability may be positioning themselves for success in terms of community and funding.
What was once valued engineered out of projects as a “nice to have” is now finding its way to be a “need to have.” Increased awareness of social and emotional health is impacting multifamily housing through capital. Discipline, innovation and bringing purpose and thoughtfulness to investments now hold value.
For more insights on National Multifamily Housing Council and our hospitality expertise, contact Kelli Zaremba at kzaremba@kahlerslater.com.
