4 Multifamily Industry Trends to Watch in 2022
The multifamily industry had a record-breaking year in 2021. According to Multifamily Executive, investment volume rose to $335.3 billion—almost doubling 2019’s $193.1 billion—and annual absorption hit 617,500 units. This is thanks to the continued strong demand for rental units, as more and more people are choosing to rent instead of buy since the pandemic.
As we look at how the multifamily market will perform in 2022, there are no signs of it slowing down. From job creation and economic growth to household formation, the future of the multifamily industry is strong. Here are four industry trends to keep a close eye on this year.
1. Rise of New Households
Over the past year, there has been a strong demand for multifamily units alluding to an increase in household formation. This is likely due to the pandemic in 2020 putting a pause on households forming.
During this time, we saw many young adults (ages 18 to 29) moving back in or staying at home with their parents, which was higher than any previous measurement taken, including the end of the Great Depression in 1940. The economic downturn took a massive hit on this segment, with 18% citing that their move back home was thanks to job loss or financial difficulties.
Since then, markets across the country have begun to reopen, causing an economic boom. As a result, we’re seeing this segment of the population demanding housing.
According to CBRE, it’s forecasted that the multifamily occupancy levels are projected to remain higher than 95%, and net effective rents are projected to be around 7% growth in the following year.
2. Return to the Office
With the pandemic slowly dissipating, offices across the United States have begun welcoming back their employees in-person as well as hiring new ones. This has sprung a trend of “return to the office” in major cities and metro areas, thus increasing the demand for apartments to rent.
3. New Development Projects
2022 so far is showing that there is high consumer demand for multifamily properties. This is causing developers to meet this demand by creating built-to-rent spaces with strong investor backing.
For those unfamiliar with built-to-rent spaces, it simply means designing purpose-built housing that will be listed as ‘for rent’ instead of ‘for sale.’ This can include properties like horizontal apartments, single-family rentals, or detached single-family homes as rental assets in a more extensive holding portfolio.
Growing areas that are seeing new development projects coming to fruition are urban cities. According to CRBE, it’s projected that there will be an 8% growth in urban effective rents due to higher vaccination rates, return to office policies coming back, college campuses reopening, the need for public transportation, and fewer restrictions on city amenities.
4. Effective Rent Growth
During 2022’s winter months, apartment occupancy has increased, especially in Sun Belt and Mountain region markets. These markets are dominating for new lease effective rent growth. Cities that topped the list, according to RealPage, include:
- West Palm Beach, Florida
- Tampa, Florida
- Phoenix, Arizona
- Orlando, Florida
- Fort Lauderdale, Florida
- Las Vegas, Nevada
- Jacksonville, Florida
- Raleigh-Durham, North Carolina
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