- Posted at 12:00, December 19, 2013
- By Russ Bleemer
Los Angeles-based CBRE Group Inc. has a new report out today that says that over the next three years, U.S. multi-housing rents will grow about 2.5% annually.
Despite increasing new construction, “The multi-housing sector is only now beginning to fill a supply shortage that has existed following a three-year-long drought in development resulting from the recession,” said Jim Costello, CBRE’s Head of Americas Investment Research, in a press release.
Multi-housing is defined as dwellings in garden-style apartments, mid-rise apartment buildings, and high rises. The metrics used to measure the rates in the report include total project cost per unit, the average unit size, land cost, and "hard cost and soft cost (as a percentage of hard cost) per unit."
Still, the growth rate is lower than the 3.9% growth that CBRE reports since the recovery began in 2010.
The 15-page report, "Is the Bloom off the Multi-Housing Rose?" is available in a PDF at a link on the bottom of the press release HERE.
The study projects the pace of new multifamily development in the U.S will level off at about 216,000 units annually over the next five years, "slightly above historical averages." That rate "has grown significantly since the end of the recession."
In a study chart that depicts the rent rates needed to support development, New York, not surprisingly, is the highest of 13 major U.S. cities and regions, at $3,794 per month; Atlanta is lowest at $1,775. The best markets for “achievable” developers’ rents will be in Boston, Southeast Florida, Seattle and Washington, D.C., according to the report.
The report assesses supply trends, rent levels, construction costs and cap rates. It says that "current market rents are marginally higher than what developers require to achieve target current returns in the 6% to 7% range."