In the multifamily industry, developers continuously focus on what the new year may hold for newer developments.
The resulting uptick in new communities coming online has served to increase vacancies and slow down rent growth in many metro regions. The apartment markets have absorbed the recent wave of new construction.
According to RealPage, the national occupancy rate was 95.8% in the third quarter, which is up from 95.4%. Annual rent growth has reached 2.9% in the third quarter, compared to 2.5%.
We see historically low unemployment rates, which drives household formation. Amongst this, rising interest rates and home prices continue making single-family housing less affordable, which increases demand for apartments. However, developers remain enthusiastic about building new communities.
The supply tariffs play a massive part in why some communities won't be constructed. The cost of construction materials was rising, and the Trump administration's tariffs on materials such as steel, aluminum, and Canadian lumber only add to the developer's expenses. Now, those tariffs have been lifted just recently, according to the Washington Post (May 2019). The U.S. made a deal to lift steel and aluminum tariffs from both Mexico and Canada. Lumber is still an unknown factor. With proper research and due diligence into flooring, tile, and other design products can yield significant cost savings and ensure that materials are delivered on time.
Smart-home technology is what residents today want. In the years to come, you can expect developers to integrate devices such as smart thermostats, lights, roller shades, and security cameras. However, that technology "remains to be seen."
Today's renters, especially millennials and Generation Z, have a strong need for personal connections. Developers will continue to outfit their new communities with amenities such as clubhouses that feature coffee or wine bars. Properties with several indoor and outdoor areas that permit comfortable conversation among friends will win in 2019. With growing numbers of residents who are working from home, developers are ever increasing co-working spaces into their communities.