The 2019 “Emerging Trends in Real Estate” is the annual real estate report put together by the Urban Land Institute and PwC.
When it comes to overall housing, the recently-released report offered good news and not-so-good news.
On the good news front, fundamentals continue driving demand for apartments. “Millions of 20-somethings are still funneling along at high amplitude into rentals, now solidly supported by a macro economy that has reached virtually ‘full’ employment,” the report notes. Also adding to the demand influx is the growing pool of renter-by-choice baby boomer demographic.
The not-so-good news? Scarcity of product for certain populations. “Even at 360,000 multifamily starts (in 2018), we’re not building enough units in the right places to meet demand, and keep rents in check, and now construction costs are going up faster than we can raise rents,” observed a CEO of one of the nation’s top multifamily developers.
Additional trends impacting the multifamily sector include:
• Technology increase. Technologies are impacting all facets of multifamily, from property management to automated building. “Technology provides one of the biggest opportunity areas to address the decoupling of household budgets and development expense,” the report observed.
• A plethora of regulations. Legislative and regulatory issues such as density and rent control are becoming issues on the municipal and county level. While rent control is being used as a method to control affordability, regulating rent increases negatively impacts NOI which, in turn, can suppress development.
• New renting models. Four new models pertaining to long-term living leases are Airbnb units, co-living, single-family rentals and micro apartments — as well as hybrids between them all. These are “on the fringes of the long-term lease, cash-generation business models that dominate the multifamily space today,” the report noted.
reprint from Connect Commercial Real Estate