Multifamily construction activity this business cycle has consistently exceeded that of the previous decade. Class A development accounted for more than 68% of annual deliveries in the peak construction years of 2015-2018—and just 10 markets captured 36% of the deliveries.
Cushman & Wakefield's Multifamily spotlight explores the future of this sector, including these key highlights:
- The construction wave was a response to robust rent and occupancy trends supported by renter household growth, particularly growth of affluent households.
- Construction has peaked. Class A deliveries have declined precipitously, down 22% Q3 2017 YTD - Q3 2019 YTD, contributing to multifamily pipeline waning.
- Construction will continue to soften and remain constrained due to rising construction costs, land scarcity in key pipeline markets, moderating rent growth and slower capital appreciation among multifamily assets.
- We expect the current investor focus on workforce housing to continue in the near-term given the slower construction environment but also a cyclical reversion to Class A assets in the medium-term.